BUGEN3711 Applied Principles For Responsible Business Practice

Introduction

The sustainability business strategy can trace its roots back in the early 1960s with the widely acclaimed silent spring publication by Rachel Carson. By and large, the report pulled the curtain that hitherto had blinded the world that use of pesticides to maximize agricultural production was the new maxim. However, this only led to the destruction of habitats and loss of biodiversity, the very things man depended for survival (Jameson, 2013).

This realization led to the convening of the first global environmental meeting dubbed the world commission on environment and development (WCED) and the subsequent release of the Brundtland report on sustainable development. Sustainability within the business context implies taking care of the economic, social and environmental needs of the present generations without curtailing the needs of future generations (Laasch & Conaway, 2014).

There are many areas of sustainability that businesses can focus on. On the economic front, for instance, businesses can seek new innovative ways of maximizing their productivity without putting a strain on the available resources. An example is the Coca-Cola company approach to transportation. To avoid excessive consumption of petroleum products, the company realigns its distribution networks and supply chain through efficient inventory control such that raw materials and finished products are delivered optimally according to projected orders (Porter &Kramer, 2009).

Similarly, companies can leverage the social sphere by involving the local communities and the employees in their strategy. Nestlé has integrated local communities in developing countries in the production of quality cereals that the company uses for its products. Coca-Cola involves plastic bottle dealers in their supply chain where they collect used plastic bottles at a fee for recycling. These interventions decrease the cost of production for the two companies while employing local communities (Ziska, 2016).

In the early 1970s, in his economically acclaimed theory of the firm, Milton Friedman inferred that firms exist for one purpose, to maximize their wealth. He observed that firms pursuing the sustainability strategy would be negating their core competencies and hence their objective of creating wealth for the shareholders.

This theory has however been challenged on many fronts by many multi-billion empires pursuing sustainability strategy to the core. The market is replete with green businesses such as Tesla, Nestlé, Unilever and Natura among numerous others actively pursuing the sustainability strategy (Porter & Kramer, 2009).

To adopt the sustainability strategy firms critically examine three broad components to ensure that their operations are viable and can generate a lasting demand from their internal and external stakeholders. The management has to accept the benefits of sustainability. Today, customers are more than ever before associating themselves with businesses following sustainability strategy. The company, therefore, has to craft a company strategy that aligns with sustainability. It also has to improve its networks such as the suppliers and distributors to conform to the strategy and lastly, it has to align its operations such that they are efficient to reap the benefits of the sustainability (Haski, 2018).

To expound how an organization can leverage on sustainability, this report focuses on environmental strategy. The world is facing myriad environmental challenges today and even though many policies have been crafted to address the challenges, concerted efforts are required more from private companies as the drivers of change in societies (Kashmanian, Wells & Keenan, 2011).

To begin with, the levels of environmental pollution have exacerbated. With 55 percent of the population living in urban areas and set to increase to 68 percent by 2050, waste management is a big concern to many cities across the world. In America, it is the leading environmental challenge. It has led to low quality of life and caused loss of biodiversity for instance turtles, whales, sea otters and numerous species of aquatic and marine fishes. Moreover, the unsustainable use of oil and gas has led to myriad environmental problems which this report reflects upon (Jameson, 2013).

The unsustainable methods of extraction and use of oil and gas are estimated to be 30% more depleting than the resource can regenerate itself. For this reason, oil is considered a non-renewable resource. Even more worrying is the damage that is done to the environment during extraction, refining, transportation and finally, using the oil and gas.

Oil occurs naturally in many areas such as the Middle-East where an oil rig simply excavates the earth to reach the oil well. However, in some areas, oil occurs in geological rocks called shale where it requires the fracking process to extract. This process requires huge amounts of water which leads unsustainable water use (Schaltegger, 2011).

After the extraction process, the water that was used in the fracking process is contaminated with heavy metals. Many companies often release where it further contaminates ground and surface water (Oyunyemi, 2013).

During mining, huge amounts of oil spills on the immediate environment. This leads to explosions which in many cases result in death to both people and wildlife. Furthermore, oil transportation has in many cases led to spillage in oceans and other water bodies. The Exxon Valdez incident in 1989 led to the death of many species of fish and birds. Recently, the British Petroleum incident in the Gulf of Mexico exposed the dangers of offshore oil mining (Jameson, 2013).

The refining of oil and its use releases hydrocarbons into the atmosphere. These hydrocarbons combine with other gases to form hydrofluorocarbons HFC which degrade the ozone layer leading to global warming and climate change which is a potential existential threat to mankind and other species on earth (Schaltegger, 2011).

Many companies are recognizing the benefits of adopting green energy sources. What's more, the customers are associating with green companies. To leverage on this wave of change companies are also supporting research in alternative energy. Honda motor company is developing vehicles using hydrogen gas (Park, 2017).

Companies such as Coca-Cola are adopting reduction strategies. The company is implementing inventory control to reduce the number of vehicles and trips made by their vehicles. This has reduced their operating cost besides the benefits to the environment (Porter, 2008).

Companies can become innovators in renewable energy technology. Organizations like Tesla are developing technological advances in renewable energy sources such as electric energy and solar powered vehicles (Porter &Kramer, 2009).

Implications at a personal level

On a personal level, environmental sustainability implies doing my level best ensure that I contribute in my small way towards efficient use of oil resources. I, for instance, prefer to walk short distances than take a taxi or buses. I prefer to cycle to work and school instead of using public transport. I am also obliged to share environmental concerns to ensure that collectively we use resources sustainably.

This report focuses on sustainability strategy. It highlights the three sustainability strategies and how businesses can adapt them to gain a competitive advantage. The report then narrows on the environmental sustainability strategy with regard to the energy resources. It exposes the environmental challenges caused by mining and using oil and finally gives measures to address the challenges which businesses can exploit.

Overview of the of the case

This case study involves a young man called Deepak who is facing an ethical dilemma. On one hand, he has a business to sustain as the marketing executive during tough business times. On the other hand, he faces an unethical situation whereby he's being asked to pay a bribe for an order to be awarded to him.

Deepak runs a small garment firm with his father and his three friends. His company manufactures low-cost garments for both local and multinational companies in India. The company enjoys total revenue of 100,000,000 Rupees per year. The company is experiencing a downward trajectory in sales because it early in the year 2000, its annual turnover was 150,000,000 Rupees.

From the case, it is evident that the firm is facing cashflow problems with its cash tied in receivables. This means that it has an asset ratio problem, meaning its liabilities in the near term exceed the assets. The business may be a going concern but for a limited period of six months. The employees want their cash daily and the suppliers want their cash on delivery yet customers are not paying as quick.

The firm has monthly capital of 1000,000. While Deepak joined his father in running the company in the year 2008. Currently, the business is facing a recession. The customers are exceeding the 90-day payment window and the firm has receivables amounting to 10,000,000.

It is also evident that Deepak is relatively new to the business and that he requires some time to learn from the industry.

Deepak got an order worth 2,000,000 rupees to manufacture uniforms for their staff, the company was willing to pay half the order amount upfront and the rest a month after the order was fulfilled. There is a catch, however, the purchasing manager wants a 10 percent bribe of the order price or there is no deal.

While Deepak is of the thought that paying the bribe would hamper the business in the long term, especially with regard to reputation, his uncle is of the view that the bribe should be paid as it is the normal thing currently. Deepak knows this is unethical and goes against the pillar 5 that is knowledge and alignment (Fernando, 2009).

Outcome the key character in this case should aim

The main outcome Deepak should aim for is not giving the purchase manager the bribe. This is because this goes against his marketing professional ethics and if he proceeds to give the bribe, the garment manufacturing firm may face reputation issues in future. Besides there are many other choices to explore in order to resolve the tender stalemate. He should also aim to convince the key company managers that is the father, uncle, and the three partners.

What should i say?

I should say that paying a bribe is unethical and that it goes against the fabric of the company. I would add that should the information about the bribe leak, the firm would suffer irreparable damage. I would also say that there are other options to pursue such as criminal case for corporate malfeasance

To whom should I say?

I should talk about the ethical case to the following stakeholders:

1. My Uncle: I would explain to him that we should not treat the bribe as a normal business operating cost because it is unethical and because it will embolden the purchasing manager to make more outrageous demands in future.
2. I would also speak to my father regarding the bribe with reasons why the company should not accept to give out the bribe. This is firstly, because it is illegal, and secondly, because it will hurt the reputation of the company in future.

When and how to reach the best outcome

The best time to reach for the best outcome is during the company group management meeting with all key decision makers. The way to achieve the best outcome is by sharing my voice. In this case the group managers would hear the merits of the argument.

What is at stake?

The main problems in the case include the recession that has hit the garment industry. For this reason, new orders are hard to come by the company may be at stake. It is also evident that the customers have not been able to honor their payments to keep the business running therefore the company assets are at stake. As a result, the business can only be able to sustain itself for a period of six months therefore the employees jobs are at stake. Another issue is that the purchasing manager wants a bribe of 10 percent which is against the principles I portend. The employees’ jobs are at stake since the firm is expected to last just under six months.

Key Decisions

Deepak made a number of decisions in the case. His first decision was that paying a bribe was unethical and against his values. He thought this would have a negative bearing on the firm in future. Secondly, Deepak made a decision to seek his father's attention as his uncle seemed to side with an unethical decision.

The GVV model action plan

The GVV or Giving voice to value, model is a seven pillar tool designed to help one come up with concrete decisions about conflicting ethical issues. It portends that everyone wants to choose the right business and ethical values given an incentive in their decision (Gentile, 2017).

The Ethical scenario

Deepak has been presented with an ethical case in which he is expected to make a 10% bribe to the purchasing manager in order for his order to be processed. He is in a dilemma because the survival of his business might very well depend on his decision. However, giving out the bribe might also derail the business in the future (Latham & cote, 2017).

Pillar 1: Values

Deepak knows very well that proceeding with the bribe to the purchasing manager is unethical. After bringing the issue to his uncle, he is of the opinion that paying a bribe is normal. However, after considering the issue, Deepak still decides to stick with his ethical values (Park, 2017).

Pillar 2: Choice

Deepak made his choice to go with his business values. This is considering a number of potential outcomes and the different choices each decision portended. To begin with, there is the choice of giving the bribe and saving the company in the short term. Then there is the choice of what giving a bribe may mean for the future of the business. Also, there is the fact that he has not explored all alternatives given the circumstance. What if he reported the matter to the company officials or to the criminal investigation agency. All the same, he decided to stock with his values.

Pillar 3: Normalization

When Deepak presents his uncle with the bribe case, his uncle plants a seed of doubt in his mind by normalizing the bribe. He says that bribes are part of everyday costs incurred while running a business. He also normalizes the case by seeing the problem as a daily challenge hence the need to seek an opinion from his father (Ferrel, Harrison & Hair, 2018).

Pillar 4: Purpose

As a marketing executive, Deepak defined his professional purpose in running the business and even let his uncle know his opinion on the matter.

Pillar 5: Knowledge and Alignment

Due to his understanding of the business, Deepak knew that the bribe could solve the company cash problems but only for a short while before reputation issues came to affect the firm in the future. This helped him to make his concrete decision based on his values

Pillar 6: Voice

Deepak went to his uncle where he voiced his concerns. He also anticipated voicing the same reasons to his father and the business partners. These meeting arrangements would help in building his capacity to voice his concerns.

Pillar 7: Reason and Rationalization

I am already prepared myself in case i may face any objections to the decisions he made when he finally meets the father. This anticipation came from the earlier meeting he had with his uncle who made it very clear that he was for the bribe.

Levers for argument

Since I am convinced that paying the bribe is the wrong thing to do, I need to convene a meeting and tell this to his father and his partners. I need to convince them that for all intents and purposes the bribe will do the company well for a short while but will damage its reputation in the future. Besides, the decision to pay the bribe may result in psychological loss of zeal to work for the company since it will be known that only bribes sort things out. It is worth mentioning that the company has not explored all decisions. For starters, if the company won the tender, why not bring the issue of bribe to the senior management of that company or institute criminal proceedings by reporting the purchasing manager to the authorities (Gentile, 2017).

Most powerful response

That the purchasing officer is not the last word in awarding the tender. There is a procurement and disposal committee for the company and they would look at a corruption complaint leveled against the purchase manager.

There also the police to enforce law and would correct the situation on reporting. Another powerful response is that the company still has six months to maximize on other business interests.

Unilever Company Corporate Social Responsibility

Unilever is one of the oldest multinationals that has transcended business challenges spanning over 150 years to become one of the highest valued company in Europe. Tracing its roots to the early 1970s, in London, the company has spread its operations in over 190 countries using a variety of tactics including greenfield strategy, foreign direct investments, acquisition, and wholly owned subsidiaries (Kissinger, 2016).

Unilever deals with fast moving consumer goods and has over 400 brands. Its most notable brands include Vaseline, Knorr, Omo, Royco, and Dove. One of its biggest subsidiaries is Ben and Jerry a confectionery and beverage company acquired in the year 2000. The company has over 180,000 employees and enjoys annual revenue in excess of 52 billion Euros annually (Thompson, 2016).

Corporate social responsibility

At its most basic, corporate social responsibility (CSR) is an approach that appeals for businesses to engage in sustainable development by contributing to the social, economic and environmental concerns of their stakeholders (Ferrel, Harrison & Hair, 2018).

Economists have in the past argued that CSR is a deviation for businesses from their primary objective which is to maximize shareholder wealth. However, the modern-day consumer is very biased and wants to associate with businesses that address their interest. Latest research shows that 41% of customers choose companies based on the strength of their CSR agenda (Statista, 2017).

Unilever CSR strategy

For eleven straight years, Unilever has been crowned the best company in the food sector by the Dow Jones in the corporate sustainability indices. It is also in the top ten list of the world's most sustainable companies (Thompson, 2016).

To achieve this feat, Unilever has excelled in supply management approach, its employee relations, community involvement, environmental stewardship and financial reporting under the 3P approach that focuses on People, Profit and Planet tenets (Porter & Kramer, 2009). This report will address these CSR concerns in detail.

For any company to excel in the cutthroat competitive environment, it requires highly skilled and motivated employees. Unilever has a five-pronged approach to its CSR strategy and its human resources rank second in its approach second only to customers (Kissinger, 2016).

The company ensures that the employees are well compensated. Their rates of pay rival the best paying companies anywhere. Secondly, Unilever makes sure that its employees are well motivated. They have a healthy work-life balance culture that ensures that their employees perform their best without bearing work-related stress (Lindgreen, Swaen & Maon, 2009).

On career development, Unilever makes supports their employees to achieve the best in their careers. The company has an in-house training program complete with succession and upward mobility programs. The company also sponsors its employees for further studies or for specialized courses not covered by its in-house training program (Kissinger, 2016).

Unilever has one of the best parenthood support programs for workers who are transitioning to motherhood and fatherhood. To begin with, the mothers have access to over 4 months of paid maternity leave and regular breaks from work for the parents. Moreover, the company provides childcare support for the mothers while at work (Thompson, 2016)

The company has a unique flexibility program for its employees that afford them the opportunity to work from anywhere including their homes so long as they achieve their objectives. This cuts on energy use compared to when they travel to work therefore ensuring sustainable energy use (Kissinger, 2016).

Lastly, Unilever has a responsive health and safety program at their workplaces to ensure that the employees lead healthy work life. The program at the very least covers ergonomics, display screen safety and working hours among other concerns (Thompson, 2016).

Unilever involves the local communities where it operates through community development initiatives and environmental protection. On community development, Unilever reaches out to the communities through health care by setting up health facilities and nutritional programs (Kissinger, 2016).

The company also employs people from the local communities directly in their manufacturing plants or indirectly by sourcing raw materials from them. This improves the community purchasing parity and in turn, they buy products from Unilever (Haski, 2018).

Unilever has also recently embarked on creating shared value initiatives through a partnership with the Rainforest Alliance for sustainable tea initiative. In this initiative, Rainforest alliance sources the PG and the Lipton tea bags from certified farmers thereby increasing the brand value of their tea. Unilever benefits by having a sustainable source of quality tea (Statista, 2017).

In the year 2012, the company formed the Unilever Foundation which among other things caters for the education needs of children from humble backgrounds and also for the disabled members of the community (Kao, Yeh & Wang, 2018).

Unilever uses the Foundation as a vehicle to positively engage the local communities and other stakeholders in the community in their CSR activities. This helps to build a strong reputation and a strong brand image which spurs demand for their products (Thompson, 2016).

On environmental protection, Unilever has for a long time protected the ecosystems of the communities by engaging in tree planting programs regularly. Unilever is also making progress in the utilization of renewable energy in their offices to prevent the use of non-renewable energy sources such as wood or coal from the local communities (Kissinger, 2016).

Unilever has moved its supplier relationships to emerging markets such as Africa, East-Asia and South America where the company sources its palm oil and cocoa raw materials found in a sizeable range of their products (Kao et al., 2018).

To support their suppliers and ensure top-notch quality, the company uses FLO-CERT auditors. This process safeguards against exploitation of their suppliers and motivates them to use the recommended crop cultivation methods which guarantee Unilever an ample supply of quality raw materials while benefitting the suppliers economically (Porter & Kramer, 2009).

Unilever employs a partner to win strategy which ties the organizational growth to their economic gain. This implies that the suppliers get interests and bonuses whenever the company registers increased profits. This motivates the suppliers to provide the company with quality raw materials for superior products (Thompson, 2016).

The strengths that Unilever enjoys from its CSR strategy include a strong brand image. This is because the suppliers and local communities engage in its programs which give Unilever free advertisement creating a strong brand that customers want to associate with(Porter, 2008).

Another strength is the numerous supplier relationships that Unilever has. This ensures that the company does not suffer the bargaining power of suppliers as the company has many options to consider (Porter & Kramer, 2009).

Due to the aggressive CSR undertaken by the company, it enjoys suppliers from many geographical backgrounds. This allows the company to diversify its range of products and gives it insurance in case of failure from one geographical area (Kao et al., 2018).

The weaknesses of the CSR include failure to completely lock the suppliers. For this reason, the suppliers are free to provide raw materials to competitors which means that its products are substitutable (Porter, 2008).

The CSR initiatives also integrate many third parties such as FLO-CERT who can abuse the privilege to disenfranchise the suppliers from the company. Also, the third parties can peddle trade secrets to competitors. Since their resources are not rare, costly or inimitable, as espoused by the resource-based view theory of a firm, they could end up attracting strong competitors (Haski, 2018).

Unilever can improve its CSR approach by encouraging shared value with the local communities. In this approach, the company identifies business opportunities that can uplift local communities, for example, they can diversify to health products.

Another way is by the company taking more control of its CSR responsibilities instead of engaging third parties such as FLO-CERT who may use the association to advance their own interests.

This report inquires into the CSR process. It gives approaches used by firms to fulfill their CSR mandate. The report goes further to unveil the importance of CSR. Further on, the report looks at CSR initiatives employed by Unilever Company in terms of human resources, the local communities and supplier relationships. It looks at the strengths and weaknesses of the CSR initiatives and recommendations to addresses the weaknesses.

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Kao, E. H., Yeh, C. C., & Wang, L. H. (2018). The relationship between CSR and performance: Evidence in China. Pacific-Basin Finance Journal, 51, 155–170.

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Lindgreen, A., Swaen, V., & Maon, F. (2009). Introduction: Corporate Social Responsibility Implementation. Journal of Business Ethics, 85, 251–256.

Porter, M. E. (2008). Competitive Advantage: Creating and Sustaining Superior Performance (10th ed.). New York: Simon and Schuster.

Porter, M. E., & Kramer, M. R. (2009). Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review, 78–92.

Statista. (2017). Unilever - Statistics & Facts. Retrieved October 27, 2018, from https://www.statista.com/topics/1397/unilever/

Thompson, A. (2016, November 23). Unilever’s Corporate Social Responsibility & Stakeholders. Retrieved October 27, 2018, from https://panmore.com/unilever-corporate-social-responsibility-stakeholders