Aim / Purpose
The aim of the report is to develop an understanding about the changes of sustainable management and based on it studying in detail the three frameworks that are the Business Ethics, Sustainability and Corporate Social Responsibility and further the discussion of any two theories from the framework in application to Fiat Company.
Overview of the Company
Fiat is a subsidiary of the FCA, Italy which is in the automotive industry which serves at the global level. It is an Italian brand which is headquartered in Turin, Italy. The company invested in its automobile business in 2007. The company has its presence around the world and the developing markets are Europe and South America as they are willing to start its production there. The company has also been found with one of the lowest value of the carbon emissions which harmful to environment and people (Fiat, 2017).
The stakeholders are the competitors, suppliers and customers of the company.
The major competitors of the company are the German player Volkswagen and the French Renault. Others are Ford and Toyota which have vast business in UK. Volkswagen is enjoying a sound business of producing a large number of cars, vans and trucks. In the emerging markets of Asia where the disposable income and people’s standard of living is increasing day by day, the local and other strong players like Suzuki and Hyundai are threats of competition (Aaker, 2010).
Suppliers are considered to be important stakeholders as they are provide with goods and services to the company. Moreover, being a growing company they have to also focus on the price of them for growth (Grigson, 2011).
Customers are the king of the market, the company has to focus on their needs and also keep a check of what competitors are offering them so that they are not persuaded towards them and not Fiat (Prahalad and Ramaswamy, 2013).
Outline of the report
The report will follow the explanation of the three frameworks that are business ethics, sustainability and corporate social responsibility. The two contrasting theories of each of the framework will be explained in relation to the Fiat Company. The report will discuss the findings of the approaches which and the final conclusion.
Business ethics refers to the study of the policies and principles of the business that used for examining the problems related to ethics in the business. Ethical issues are related to insider trading, corporate social responsibility, corporate governance and bribery. In broader sense what ethics means the ability of the person to make a difference between right or wrong? They are those principles, values; standards which are formulated by the organisation in order govern the activities and behaviour of the individuals working in the organisation. These are important part of the organisation because it plays a significant role in framing a good brand image of the company (Crane and Matten, 2016).
The concept of business ethics is a historical concept which has constantly being evolving over the period of time. It is present everywhere and at each level whether it is personal or professional level or it is family home or workplace, right ethics are required to be followed always. After the events of many scandals the ethical standards in every organisation is given top priority. In order to keep an eye on the ethical standards of an organisation the organisations are required to hire independent directors who do not have any personal interest of the company (Rossouw, Vuuren, Ghani and Adam, 2010).
In order to prevent organisations from being into wrong and unethical doing, each and every department has to work in the righteous manner. Departments like the sales and marketing, production, human resource management etc. When each department will does their part of work the overall working of the organisation. In addition to this, following an ethical process of moving the business forward will always be a combined group process. Therefore; it is very important that each individual of the organisation from the lowest level to that of the top most level has to work within the set ethical standards (Trevino and Nelson, 2010).
Corporate Social Responsibility
Corporate social responsibility commonly known as CSR activities are those initiatives which are taken by the organisations for the welfare of the society and not for their profit earning motive. It can involve initiatives like effects on the environment because of the company, education promotion; eradication of racism, cleanliness is next to godliness and social well-being etc. CSR is also known as corporate citizenship and its can be said to be the extension of ethics because it is also the part of the doing the good for the needy section of the society. It originates from the end of the company which demonstrates the motto of the company to do something fruitful for the society selflessly (Crane, Matten and Spence, 2008).
CSR has evolved as a popular concept over the period of time as corporations are mandate to invest into CSR activities as government has also suggested the companies to invest a certain amount for the social well-being. Government also keeps a check of big multinational companies that they must not pretend as doing CSR but in reality they are merely window dressing. The CSR defines the company’s sense of accountability towards the environment and for the people among which it is operating. It is the voluntary idea of the organisation which helps in achieving a positive response from all the stakeholders (Grayson and Hodges, 2007).
The benefits of the CSR activities for any corporation are as follows:
- Creates a brand image and reputation of the company.
- It is a support system for the external relationships.
- It creates value for the company for its customers.
- It is a promotional tool which gives a competitive edge in relation to its customers.
- The triple bottom line benefit is the one of the best way of evaluating the CSR.
- It helps in moderating the risks.
- It builds a business strategy (Kotler and Lee, 2008).
Rights and Virtue Theory
In business ethics the theory of rights and justice are given the top most priority. Rights are very important as they form the right code of conduct in organisations. They also prevent the interests of the people working in an organisation. Rights are significant with respect to the decision that are made in order to decide about what are the right kind of characteristics that are attached to the rights of the individual and society. Rights are to be decided by the organisation itself as it will explain the goals of the organisation. The rights theory of business ethics is important as it upholds the code of conduct that they want their employees should follow. The organisation on its own decides about the rights that are to be given to each and every single person working in the organisation. It includes all the people starting from the top management to the managers and the employees (Hoffman, Frederick and Schwartz, 2014).
The automobile company Fiat upholds a very strong code of conduct. It bounds every person of the organisation to behave within the internal culture of the company. All the decisions are taken by the Fiat Group which is mandate to be in the good interest of the Group. There are guidelines which are formulated and they are a fundamental part of the code of conduct. Rights can be explained with the help of an example in a better way. For example: An employee who works for the company on gazetted holiday because of an emergency is entitled to avail the salary of that particular day. There are ethical rights for each and every designation of the company in order to save the interests of the people.
Another theory of business ethics is the virtue theory which refers to judging a person on the basis of their character and not by one’s action which can depart from normal behaviour. Under this theory any individual should be judged on the basis of character and not because of any action as some actions are driven by situations (Weiss, 2014). Therefore, it is required that situations are also need to be analysed because of which a person was forced to take an action which might be good or not so good. Ethics play a very significant role in the decision making of individuals. Any person’s character should not be judged by their action but their moral character should also be taken into consideration. The biggest problem with this theory is that people are misunderstood because of some of their actions which were driven by any unfavourable situation and not their original and clean characters. The Fiat Group also works in favour of the virtue theory in which they consider the characters of their employees and not just give away decisions on any one happening but takes into consideration the till date behaviour and performance of the employee which helps the management to take the right decision without hurting the sentiments of an individual (Fiat Group, n.d.).
Corporate Social Responsibility
Creating Shared Value and Stakeholder Theory
Corporate Social Responsibility comprises of those activities which are carried out for the benefit and welfare of people and society. It comes out of social motive and not profit earning motive only. Corporate Social Responsibility is abbreviated to CSR and is also known as corporate citizenship, corporate conscience and responsible business. The motive behind the CSR is to make long term profits and it builds shareholder’s trust. It also reduces the business risk as the accountability of the corporate actions is being taken by them.
The stakeholder theory gives importance to the stakeholders of the organisation. In this theory the stakeholders are said to be the main primary concern of any organisation (Freeman, et. al, 2010). The stakeholders are basically all those who are related to the organisation they are the shareholders, suppliers, employees, customers and government. Stakeholders are the ones with whim an organisation runs. The interaction with the stakeholders is also important as there are internal and external both kinds of stakeholders in an organisation. An organisation is obliged to satisfy each and every stakeholder of it. When the organisation keeps the stakeholders happy and satisfied it is beneficial for them financially and growth wise. All the CSR activities benefits the all the stakeholders as it earns long term profits. It also gives a transparent picture to them and last but not the least that it is ethically and morally very right for the business (Edwards, Miles and Winterfeldt, 2007).
The creating shared value theory is all about the competitive advantage that an organisation earns because of the CSR activities that it does. The CSR activities add a benefit to the business. There is a relation between the strategies of the business and the corporate social responsibility because CSR is more or less a strategy of the business to earn reputation in the market. By the help of the CSV the company tries to create a distinct value of it in the market and different from that of its competitors which is capable enough to provide an edge to the company. The creating shared value is very much different from the CSR, the sustainability rather it is a unique way of achieving success in the business. Creating shared value deals with the achievement of the benefits from the CSR activities of the organisation (Porter and Kramer, 2011).
The company Fiat is also working on several theories of business ethics and the corporate social responsibility (Fiat Group, n.d.). The theories discussed are the rights and virtue theory of the business ethics and the created shared value and stakeholder theory of the corporate social responsibility. The laws which are being made for the safeguarding the rights of the people are like prevention of money laundering, reputation, illicit payments and bribery, competition. For employees also they have formed guidelines for the code of conduct of the employees. Equal opportunities should be given to all the employees for the benefit in their current job and job career. Child and forced labour are also not employed by the company as it is against the law. The company also provides the freedom of association to its employees to form trade unions. The reason behind this is that it gives the opportunity to the employees to communicate their needs, problems and opinions of the employees through the trade union representative who put the perception of the employees in front of the managers and top level management. Basically, trade unions are made for the recognising the rights of the employees that they should get (Fiat Group, n.d.).
There are ethical standards for any kind of harassment that prevails or is likely to be seen in the organisation. It is not at all acceptable by the company (Fiat Group, n.d.). There are some guidelines for the working environment of the organisation. For maintaining a cooperative working environment in the organisation the Fiat Group has asked all its employees to abide by the laws made for having a good working environment which says that the employees are not allowed to have drugs, smoke and alcohol during work hours. It is also expected that all employees should respect each other and do not have an offensive behaviour against any of the subordinates or colleagues. The company also abides people who are in positions of one or the other responsibility because these will be the people who will create an example for their subordinates. Such people will set examples for the employees. The leadership provided by the positioned employees will ensure that the employees are working within the ethical principles and the code of conduct.
The created shared value of the company is created by ensuring the long term tangible value for its shareholders. For creating the same, they provide eco-friendly and safe products, offering the products which are innovatively mobile and competitive products (FCA, 2016). The company believe that cannot be only created by the CSR activities or by offering quality products but developing the managerial and professional skills among the people of the company. Another emphasis should be on the impact that is created on the environment through the manufacturing or non-manufacturing processes that the company follows. The business governance mode should be transparent and clear which will develop a sense of trust among the people associated with the company. The company has started almost more than 4000 environmental projects at all of their plants established worldwide (FCA, 2016). The Fiat Group recently came out with Pacifica Hybrid which is an electrified minivan first in the industry. Such kind of initiatives shows the company’s concern for the society and the environment and not just the profit.
Company also saves the electric energy by deriving it from the renewable sources and the improvements are still going on (FCA, 2016). Company can earn the trust of all the stakeholders through all such activities and initiatives which will help them to maintain the market value of the company. Automobile market being a very competitive one a company is required to work on the innovation and strategy which shall take them a step forward and will give a benefit in comparison to the other players of the market.
From all the above discussion it can be concluded that the company has been following the theories of business ethics and corporate social responsibility. All the theories show that the company has been working upon the strategies which are aligned to the ethical standards and the corporate social responsibility of the company which comes out to be for the societal benefit and not the profit motive.
The recommendations which will help the company to bring out improvements in the future are as follows:
- The company should wok upon establishing new manufacturing plants in those areas which are rich in resources.
- The new plants should be environment friendly like they should be working in solar plants which will reduce the wastage.
- Manufacturing more of electric vehicles will lead to the increase in the goodwill of the company.
- The company should also focus on the causes in which the company is getting into.
- Advancement of technology will respect to the autonomous vehicle, designing vehicles which could give the benefit of two vehicles just as the company did it by the creation of the minivan.
- Cars with active window displays will help the driver to know about where to turn next by the help of the navigation.
Such recommendations will help the company to innovate in future for the profit earning but following a sustainable method will give them brand image and reputation (Forbes, 2015).
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