Toyota Motor Corporation (‘Toyota’) is among the largest automotive manufacturers globally, as reflected by its consistently large share of the international automobile market (Piotrowski and Guyette Jr. 2010, 91). Being a multinational company, Toyota desires to exhibit strong Corporate Social Responsibility (CSR) by balancing its financial performance with its many stakeholders’ interests (CSR Policy 2017). This report applies CSR to examine Toyota’s social performance regarding the areas of environmental sustainability and health and safety, with respect to internal and external stakeholders (including employees, customers, competitors and the wider society). The report proposes that Toyota’s positive environmental social performance - through its hybrid electric vehicle innovation and Environmental Challenge 2050 - has been overshadowed by its recent health and safety shortcomings, such as its 2009-2011 vehicle recalls and allegations of overworking its Japanese employees.
Toyota’s CSR position
While firms exist to gain profit, they also arguably have a social responsibility to contribute to the development of societies that host them. CSR is the notion that a firm should have initiatives that advance other stakeholders’ interests beyond its own financial interest and existing legal obligations (Doh and Guay 2006, 47). Therefore, firms must ensure such responsibility is fulfilled by their social performance in the economic, legal, ethical and philanthropical dimensions (Cortez and Penacerrada 2010, 119).
Toyota signals a proactive CSR approach by pledging to “take initiative to contribute to harmonious and sustainable development of society and the earth through all business activities” (Toyota Australia 2016, 5). The following cases compare the goals of Toyota’s CSR-guided approach (as listed in its CSR Policy) with its actual social performance in the areas of environment and health and safety, with respect to various external and internal stakeholders.
Case for Toyota: Environmental Sustainability
Hybrid electric vehicles
In view of CSR, organisations have integrated environmental sustainability and climate change mitigation into their corporate public policies. This reflects their alignment with current social expectations endorsing international climate change conventions like the 1997 Kyoto Protocol (Backman, Verbeke and Schulz 2015, 546). Toyota demonstrates its strong public commitment to environmental sustainability by “[aiming] for growth that is in harmony with the environment by seeking to minimize the environmental impact of our business operations” (CSR Policy 2017).
To achieve environmental sustainability, Toyota’s espouses “safer, cleaner and superior technologies that satisfy the evolving needs of society for sustainable mobility” (CSR Policy 2017). Notably, Toyota has a played a significant innovative role in proliferating the global consumption and production of hybrid electric vehicles (HEVs) such as the renowned Toyota Prius (Pohl and Yarime 2012, 1432). Due to their combination of electric motors and internal combustion engine drivetrains, HEVs emit less greenhouse gases and are more energy-efficient relative to conventional gasoline-powered alternatives (Cortez and Penacerrada 2010, 124). The wider society is a notable external stakeholder group that greatly benefits from Toyota’s HEV technology. Notably, The Japan Times (February 15, 2017) reported that Toyota HEVs have reduced worldwide greenhouse gas emissions by over 77 million tons compared to similarly-sized gasoline-powered vehicles. Through ‘cleaner’ technology, Toyota’s minimises its contribution towards climate change, better ensuring the preservation of existing biodiversity and ecological habitats.
Moreover, Toyota’s actions have also positively affected competitors, an external stakeholder group. By sharing its ‘Toyota Hybrid System’ technology, Toyota allows competitors including Nissan and Ford to enhance their environmental social performance (Pohl and Yarime 2012, 1439-1440). The success of Toyota’s HEVs has also generated heightened competition for the market share of ‘clean’ automobiles. This has driven other automotive manufacturers to research and develop more efficient drivetrain technologies than HEV, such Volkswagen’s investment in battery electric vehicles (Magnusson and Berggren 2011, 326). Thus, Toyota’s environmental CSR approach has generated positive social performance in its own right, while generating a larger cumulative environmental benefit to society by influencing its competitors to adopt socially responsible and ‘cleaner’ practices.
Environmental Challenge 2050
Another venture through which Toyota demonstrates its commitment to environmental sustainability is its Environmental Challenge 2050. Toyota’s 2016 Environmental Report recognises the climate change effects caused by greenhouse gas emissions; these include extreme weather phenomena, urban air pollution, water shortages, resource depletion, ecosystem fragmentation and degrading biodiversity (Toyota Motor Corporation 2016, 6). To minimise its future contribution towards such negative effects, Toyota formulated its Environmental Challenge containing various sustainability targets. These include the attainment of zero emissions from all vehicle production operations, optimising water usage, establishing a recycling-reliant global society, and increasing its ecological conservation activities (Toyota Motor Corporation 2016, 6).
Toyota’s Environmental Challenge will ensure that it benefits the societies and ecologies it operates in as a multinational organisation through recycling and conservation initiatives, while simultaneously eliminating its greenhouse gas emissions. Moreover, the Environmental Challenge also potentially impacts employees (an internal stakeholder group) by enhancing their perceptions and awareness of Toyota’s CSR commitment. Employees who identify with their organisation’s CSR practices are more likely to internalise positive social performance in their personal behaviour and undertake voluntary activities that benefit the environment (Tian and Robertson 2015, 11). Through the Environmental Challenge, Toyota communicates its environmental public policy to both external and internal stakeholders through clear targets (zero emissions from its operations) and policies (e.g. optimising water usage, conservation projects). This increases the general awareness and knowledge of Toyota’s employees about its environmental CSR, which may increase their engagement with environmentally-friendly practices and minimise their personal ecological footprint (Slack, Corlett and Morris 2015, 542).
Case against Toyota: Health and Safety
However, Toyota’s proactive CSR approach regarding environmental sustainability has arguably been overshadowed by its poor recent social performance regarding health and safety. Toyota claims to produce “innovative, safe and outstanding high quality products and services that meet a wide variety of customers' demands” (CSR Policy 2017). Despite this, Toyota faced notable controversy from 2009 to 2011 regarding its handling of recalls affecting over 20.5 million automobiles globally, in which ‘sticky pedals’ were alleged to cause sudden uncontrolled vehicle acceleration that placed drivers at significant risk of lethal accidents (Whyte 2016, 172).
Arguably, Toyota’s handling of the recall reflected its unethical prioritisation of its financial self-interest over the welfare of affected stakeholders, which included consumers whose lives were placed at risk. Toyota’s initial recall in 2009 attempted to avoid costly reparations by simply replacing the floor mats of affected cars, which Toyota alleged to have stuck onto the throttle pedals and inhibited their proper use (Rutkow and Teret 2011, 209). However, Toyota failed to disclose the real underlying cause that was the vehicles’ defective vehicle throttles; this resulted in another costlier recall of 8 million cars (Rutkow and Teret 2011). Moreover, Toyota’s president Akio Toyoda acknowledged that such defects were attributable to Toyota’s prioritisation of cost-cutting and profits over its traditionally stringent quality control practices (Camuffo and Wilhelm 2016, 11). Consequently, Toyota faced over 100 lawsuits from consumers seeking compensation for deaths or injuries arising from cases of defective throttle operation and sudden uncontrolled acceleration (Rutkow and Teret 2011, 209).
Toyota’s socially-irresponsible response to the recalls also potentially set a negative example to emulate for other external stakeholders, including the wider society and other competitors. During early recalls, Toyota attempted to avoid further financial costs by declining full responsibility for the fundamental technical faults behind its vehicles, instead shifting the blame onto driver error and a minor ‘sticky pedals’ problem (Whyte 2016, 175). Ultimately, Toyota incurred a substantial $1.2 billion fine from US regulators for acting in a misleading or deceptive manner (Whyte 2016, 172). Such behaviour is unfortunately notable in the automotive industry; for example, Ford previously faced similar incidents of unethical consumer treatment in favour of financial cost-benefit analysis (Rutkow and Teret 2011, 209). With its substantial global market share and reputation, Toyota’s holds significant influence over the ethical and transparent behaviour adhered to by society and the automotive industry; this incident may model misleading or deceptive behaviour for both stakeholders to emulate.
Allegations of overworking Japanese employees
Toyota’s social performance in health and safety is further tarnished by its alleged overworking of Japanese employees Toyota’s CSR Policy outlines its aim to “provide fair working conditions and to maintain a safe and healthy working environment for all our employees”, an important internal stakeholder group (CSR Policy 2017). However, until 2008, Toyota’s labour policy refused to recognise any overtime over 2 hours a month as payable work, instead classifying excess hours as unpaid “voluntary participation by employees” (Chikudate 2009, 176). By refusing to compromise its profits by awarding workers overtime payment, Toyota’s desire to be renowned as an environmentally-friendly company (and increase its market share of ‘clean cars’) compromised its workers’ welfare (Chikudate 2009, 176-177).
These policies likely led to many workers developing unhealthy ‘workaholic’ behaviour because they were driven by internal company pressures emphasising total organisational dedication at the expense of personal welfare (Kanai 2009). Such behaviour increases the likelihood of ‘karoshi’: a common condition in Japan suffered by overworked employees leading to heart disease and death (Kanai 2009, 209). This was highlighted by the death of 30-year old chief engineer Kenichi Uchino, who died of heart failure after accumulating over 155 hours of overtime in one month (Kim 2007). Despite Uchino’s death inside its factory, Toyota denied compensation to Uchino’s wife and two children. Toyota claimed that Uchino’s death was not categorizable as an industrial death because his overtime hours did not count as work hours under its existing labour policy (Chikudate 2009, 179).
Toyota’s onerous labour policy not only disadvantaged internal stakeholders like employees, but also external stakeholders including their families and the wider society. Kanai (2009, 213) observes that ‘workaholic’ male workers dedicated less time and thought towards their family, and even developed hostility towards them. Toyota arguably failed to be socially-responsible in taking a proactive approach towards mitigating employees’ overworking, preferring to preserve its existing corporate environmental reputation and profits. This led to negative psychological and physical consequences for workers, their families and also the wider external stakeholder group of society – as reflected by the high rates of karoshi in Japan (Kanai 2009).
As a multinational company, Toyota’s business operations profoundly influence the welfare of many stakeholders worldwide. Toyota’s CSR Policy signals its proactive CSR approach to environmental and health and safety issues; however, Toyota has been unable to achieve the same degree of social performance in both fields. Toyota’s strong social performance in environmental sustainability (through its HEV development and Environmental Challenge) has been tainted by its recent health and safety shortcomings, as reflected by its 2009-2011 vehicle recalls and allegations of overworking Japanese employees. In the latter, Toyota’s desire to improve its environmental reputation arguably came at the cost of the welfare of its workers, their families and the Japanese society (Chikudate 2009). This demonstrates that when implementing CSR, organisations must ensure that high social performance in certain areas should not compromise other areas.
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