Discuss about the Sustainability and Philips Business Practice.
The current rate of exploitation of resources on earth is not sustainable and would deplete the natural resources. The people on earth require to modify their consumption patterns and opt for sustainable ways to deal with the situation (telegraph.co.uk 2018). The business organisations have started recognising the necessities to achieve sustainability and adopting it in some form or the other. This is where the paper opens. The paper is a management brief to educate the apex management of a business organisation the need of becoming sustainable. The author is has chosen Philips as the organisation to proceed with the study. The study would open by introducing the chosen organisation, Philips to the readers. The next section studies the importance of sustainability to Philips and the advantages the company can gain by adopting sustainability. The next section would study the good practices of sustainability and choosing an organisations which champions in adopting each of these practices. The next section justifies the importance of adoption of sustainable practices to organisations and the environment. The study would end by a brief reiteration of potential benefits of sustainability and the consequences of not adopting it.
Koninklijke Philips N.V. abbreviated as Philips is a Dutch multinational electronic goods manufacturing company. The company has its headquarters in Amsterdam, Netherlands and has its primary listing on Euronext Amsterdam (bloomberg.com). The company is listed on several other stock exchanges in its main markets which consists of Europe, North America, Asia and South America. The products of Philips consists of electrical products, electronic products and non-electrical products. The consumers of the Philips can broadly be classified into individual consumers, business organisations, medical facility providers and government bodies. The company manufactures electrical products like tube, bulbs and their accessories which find uses in homes and commercial places. The electronic products of Philips include television sets, water purifiers and heaters. The services of Philips include lighting solutions and advices on lighting projects. Philips performs lightings of civil structures like bridges and buildings. The company has entered the grooming market and manufactures products like electrical toothbrushes and razors. The non-electrical products of the company comprise of goods like baby feeding accessories. The annual reports of Philips show increase in sales from € 17422 million in 2016 to 17780 in 2017 million which points out to the increasing profitability of the company. The brand value of the also shows an increase. An analysis of these aspects of Philips would reveal that the company has sustainability at the very heart of its international operations. One can point out that the immense capital structure and revenue generation of the company propel its sustainability practices around the globe.
Importance of sustainable policies to Philips and future benefits:
The corporate social responsibility of Philips lies at the crux of all its operations and aims to accelerate the company towards bringing about sustainable development in the markets its functions. The company collaborates with governments of several nations to enable them to fight social problems like hunger and diseases. The company in order to make its global talent sourcing more sustainable has made gender equality a part of its sustainable practices. The company as shown in the cycle above aims to create value for all its stakeholders like consumers, investors, governments, employees, suppliers and the society as a whole. Philips has formed a CSR committee which works under direct supervision of the apex management which points out to the commitment of the company to attain sustainability. The company has its sustainable reports audited every year which suffices its commitment to attain and strengthen sustainability (philips.co.in 2018).
Sustainability is not only a part of corporate social responsibility of Philips but also an integral part of its product strategy. The company carries on continuous research and innovation to bring about more innovative products which would benefit the environment by consuming lese energy. The product line discussed especially, the lighting product have a range of LED products which produce more light by consuming less energy. The company in fact use lighting systems in buildings and architectural projects like domes which allow use of sunlight in the day time. The management channelizes immense amount of its capital and revenue generation towards research and development of more environment friendly lighting systems. The company in return aims to derive the following future benefits from its sustainable practices:
Poudel, Fuwa and Otsuka (2015) points out that sustainable practices pave way for boosting future revenue generation. Philips performs several sustainable projects in different countries to fight social problems like hunger and diseases. The company manufactures products which use less energy, thus emitting less heat and carbon dioxide into the environment. The company even manages its supply chain to ensure around sustainable development. These business strategies create strong impact on consumers which encourage them to buy Philips products. This would enhanced consumer support would pave way for increase in the revenue generation of the company which is already evident from the increase in profit as per the financial results of 2017 (results.philips.com 2018).
Brand value strengthening:
The increase in revenue would strengthen the brand value of Philips which is evident from yearly increase in the brand value of the company (figure 1). Bocken et al. (2014) points out in this respect that customers play pivotal role in deciding the brand value of companies. They prefer to purchase products from companies which manufacture environment friendly products. Philips manufactures environment friendly products which has earned it immense consumer base and revenue generation. These factors have strengthened the value in the market which would pave ways for the next benefits, enhanced capital generation (Bocken 2015).
Philips can generate immense capital by adopting sustainability and environment friendly methods of operations. The company by adopting environment friendly operations like manufacturing green products and supporting economic development activities in poor countries would create immense impact in the minds of the consumers which would enhance its brand power. The increase in consumer support would also lead to enhancement in revenue generation in the company (philips.com 2018). This means that the company would be able to give more returns to investors and bring about their capital maximisation (Díaz et al. 2016). The strong brand value of the company would as a result enable it to attract more investors which would generate more capital from the market.
The increase in the flow of capital and revenue would make more financial resources available to the company and pave ways towards financial sustainability. The sustainable business operations as pointed out would strengthen the capital generation and revenue generation of the company. The company would be able to diversify its business losses and expenses over a broader financial base, thus bringing down its expenses compared to its profits margin. This would as a result pave way for financial sustainability at Philips (Busch, Bauer and Orlitzky 2016).
Sustainability, as a concept differs from person to person and from industry to industry. John and Narayanamurthy (2015) in their work addresses these differences and defines sustainability as ethical actions taken by organisations to benefit the environment and the society as a whole. They further mention that organisations while practicing the good practices of sustainability take into accounts their entire business process right from supply chain to distribution of channels (theguardian.com 2018). The following are the good practices of sustainability practiced by some of the biggest multinational companies in the world:
The stakeholder engagement consist of involving the stakeholders like customers and governments in the corporate social responsibility initiatives. The multinational companies work towards planting of trees, water harvesting and reduction of greenhouse gases to improve environmental condition. They also participate in social development initiatives helmed by different host governments as a part of their sustainable good practices. Exemplary organisations following this practice are Philips (figure 5) and PepsiCo (pepsico.com 2018).
The next good practice of sustainability is employee engagement and the standard bearing companies in this practices comprise of GE Electric, a strong competitor of Philips. The company encourages its employees to take part in sustainable practices like energy saving and site clean-ups. The employees involve themselves during ‘Ecoweeks’ in environment related activities like environment fairs. The management in fact recognises these employee engagements and provide EcoAwards to motivate employees to act in sustainable ways and save energy (gesustainability.com 2018).
The aim of water stewardship is bring about sustainability in water situations around the world. This types of sustainability programs stress on making consumption of water more sustainable by reducing wastage. The plants under the control of Coca Cola Company treat the waste water and storm water. The sustainability initiatives of the company also includes recharging water resources from where the company acquires water which forms the basic raw materials for its products (coca-colacompany.com 2018).
Strong sustainable strategies go a long way in establishing strong relationship between companies and the public or the society, an important stakeholder of the business organisations today. Xu and Gursoy (2015) points out that customers prefer purchasing products from companies which follow sustainable business operations. One can infer from this that adopting sustainable practices can enable the companies like Philips gain more public support and strengthening their brand value among the public including the customers.
The business organisations like Philips have operations in diverse markets around the world and source talents from their home as well as host markets using sustainability as their USPs. Adoption of sustainable methods of operations enable these companies to attract more customers and generate more revenue. This boosts their brand image not only as a marketer of products but also employers capable of providing platforms for career development. Thus, sustainability enables business companies to create a strong brand image which enables them to attract best talents in the market to execute their global operations (Brandenburg et al. 2014).
Sustainability paves way for cost cutting in the business organisations which allow them to attain financial sustainability. Das and Rangarajan (2017) point that corporate social responsibility is a powerful business strategy which companies can use to attain cost cutting. The companies can adopt sustainable methods of operations like using more advanced machines using less energy and giving out less waste products. This would save the fuel and waste management expenditure of these companies. Thus sustainability can prove to be a formidable weapon which companies can use to gain cost cutting and financial sustainability (Thompson 2017).
Importance of sustainability practices to environment and the organization:
Sustainable practices are important to the organisations adopting them and for environment as well:
Sustainability has great significance for the environment. According to the Union of Concerned Scientists, the degeneration of environment due to industrial activities and emission of high amount of greenhouse gases have led to consequences like climate change. Climate change has contributed to natural calamities like flooding which have caused great loss of resources. Thus, adoption of sustainable operations would ultimately benefit the environment and reduce loss of resources thereof.
Sustainable practices like recycling of waste products have several importance to business organisations like Philips adopting them in a big way. Sustainable practices pave way for the companies to attract more customers and generate more revenue. This strengthens the goodwill of the companies which in turn enable them attract investments which it can channelize towards more production and revenue generation. The analysis also shows that adopting sustainable practices can pave way for cost cutting and financial sustainability in the organisations. Thus it can be justified from the discussion that business organisations can adopt sustainable means to achieve cost cutting.
The above discussion points out that there are several potential benefits of adopting sustainable practices from which business organisations can gain. The first potential benefit as pointed out is increase in revenue due to support of customers which in turns paves ways for the next benefit, strengthening of market image. These two benefits acts as securities and enable business organisations attract investments from the market, thus boosting their productivity. The strong brand image and financial strengthen along with expanding business operations enable business organisations to attract human resources which in turn attribute for their high market performances. The outcome of these benefits is sustained growth in the business operations.
Effects of not adopting sustainability:
The following are the impacts of not adopting sustainable methods of operations which one can infer the light of the discussion:
- Loss of customer loyalty
- Loss of revenue generation
- Loss of competitive advantage in the market and weakening of brand image.
- Losing of investors to competitors adopting sustainable operations.
- Increase in the costs and loss of financial sustainability.
One can conclude that sustainability is the very essence of today’s organisations and plays significant role in every aspects of them. The business organisations just like their marketing strategies, require to frame their sustainable strategies and adopt them in their day to day operations. Adoption of sustainable operations would pave ways for their revenue generation and capital sourcing. Their brand value would be strengthened which would aid them to achieve long term business growth. These pertinence of sustainability in the business operations has made participation and supervision of the apex management inevitable. The apex management of the business organisations should form sustainable business operation strategies for the entire organisations to abide. The same should be enforced across all the locations of the multinational companies like Philips. The business organisations should partner with the governments around the world to support their social development programmes. The employees of these organisations should be encouraged to participate in these sustainability programmes to ensure higher level of execution and success of these programmes. Finally, one can recommend that the management of the companies should actually perform their sustainability programmes and not treat them as mere promotional tools. These unethical activities of theirs of not adopting sustainability in action would seriously damage their market goodwill, thus causing them long term business damage. One can also recommend that the business organisations should also support their suppliers, especially the smaller suppliers which have limited resources in gaining sustainability. This would ensure acceptance of sustainability both in the multinational and small companies, thus promoting towards sustainability of the industries altogether.
Bloomberg.com. 2018. PHIA:EN Amsterdam Stock Quote - Koninklijke Philips NV. [online] Available at: https://www.bloomberg.com/quote/PHIA:NA [Accessed 9 May 2018].
Bocken, N.M., Short, S.W., Rana, P. and Evans, S., 2014. A literature and practice review to develop sustainable business model archetypes. Journal of cleaner production, 65, pp.42-56.
Bocken, N.M.P., 2015. Sustainable venture capital–catalyst for sustainable start-up success?. Journal of Cleaner Production, 108, pp.647-658.
Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), pp.299-312.
Busch, T., Bauer, R. and Orlitzky, M., 2016. Sustainable development and financial markets: Old paths and new avenues. Business & Society, 55(3), pp.303-329.
Confino, J. 2018. Best practices in sustainability: Ford, Starbucks and more. [online] the Guardian. Available at: https://www.theguardian.com/sustainable-business/blog/best-practices-sustainability-us-corporations-ceres [Accessed 9 May 2018].
Das, M. and Rangarajan, K., 2017. Corporate Sustainability as a Business Strategy in SMEs-A Literature Review in the Emerging Market Context.
Díaz, A.G., Fernández, E.S., Gibbins, J. and Lucquiaud, M., 2016. Sequential supplementary firing in natural gas combined cycle with carbon capture: A technology option for Mexico for low-carbon electricity generation and CO2 enhanced oil recovery. International Journal of Greenhouse Gas Control, 51, pp.330-345.
GE Sustainability. 2018. Employee Engagement - GE Sustainability. [online] Available at: https://www.gesustainability.com/building-things-that-matter/energy-and-climate/employee-engagement/ [Accessed 9 May 2018].
Gray, L. 2018. David Attenborough - Humans are plague on Earth. [online] Telegraph.co.uk. Available at: https://www.telegraph.co.uk/news/earth/earthnews/9815862/Humans-are-plague-on-Earth-Attenborough.html [Accessed 9 May 2018].
John, L. and Narayanamurthy, G., 2015. Converging sustainability definitions: industry independent dimensions. World Journal of Science, Technology and Sustainable Development, 12(3), pp.206-232.
nasdaq.com. 2018. Koninklijke Philips N.V. Stock Chart. [online] Available at: https://www.nasdaq.com/symbol/phg/stock-chart?intraday=off&timeframe=5y&charttype=bar&splits=off&earnings=off&movingaverage=None&lowerstudy=volume&comparison=off&index=&drilldown=off&sDefault=true [Accessed 9 May 2018].
Pepsico.com. 2018. Stakeholder Engagement. [online] Available at: https://www.pepsico.com/docs/album/policies-doc/stakeholder-engagement.pdf [Accessed 9 May 2018].
Philips Annual Report 2017. 2018. Philips 2017 Annual Results. [online] Available at: https://www.results.philips.com/publications/ar17#/performance-highlights [Accessed 9 May 2018].
Philips. 2018. How we create value for our stakeholders - Our strategy - Company - About | Philips. [online] Available at: https://www.philips.com/a-w/about/company/our-strategy/how-we-create-value.html [Accessed 9 May 2018].
Philips.co.in. 2018. PHILIPS INDIA LIMITED POLICY FOR CORPORATE SOCIAL RESPONSIBILITY (CSR). [online] Available at: https://www.philips.co.in/c-dam/corporate/about-philips-n/investor-relations/india/CSR_policy-signed.pdf [Accessed 9 May 2018].
Poudel, N.R., Fuwa, N. and Otsuka, K., 2015. The impacts of a community forestry program on forest conditions, management intensity and revenue generation in the Dang district of Nepal. Environment and development economics, 20(2), pp.259-281.
The Coca-Cola Company. (2018). Our Approach to Water Stewardship. [online] Available at: https://www.coca-colacompany.com/stories/about-water-stewardship [Accessed 9 May 2018].
Thompson, S., 2017. The financial and commercial impact of responsible and sustainable business practice.
Xu, X. and Gursoy, D., 2015. Influence of sustainable hospitality supply chain management on customers’ attitudes and behaviors. International journal of hospitality management, 49, pp.105-116.