Balfour Beatty and Corporate Social Responsibility - Case Study Example

?Balfour Beatty and Corporate Social Responsibility Introduction Recent developments in the business environment have effected changes that continue to transform and challenge organisations involve in the global market economy. These events include globalisation, rapid growth in information and computer technology, changes in the nature of firms, transformation in the role of customers and the establishment of a more robust and dynamic, but extremely competitive global market (Artman & Persson 2010; Coatsworth 2004; Hastings & McDermott 2006; Tencati & Zolsnai 2009). Although these events are not exhaustive, nonetheless, the impact of these events to the global community continues to redefine and re-shape human interaction (Suarez-Orozco & Qin-Hilliard 2004). In response to the demands and challenges of these events, organisations have introduced an improvement in the performance of their business –corporate social responsibility (CSR). The concept of corporate social responsibility is not something new (Hemingway 2002). In fact, as early as 1930’s the idea that firms should be responsible not only to its shareholders, but to society as a whole was already espoused (Hemingway 2002). However, it is only in the last forty years that discussions pertinent to CSR have become fervent. In the ensuing intensive elucidations pertinent to CSR, various concerns related to its definition, process, implications, field and many other issues have been raised (e.g. Carroll 1999; Friedman 1962; Porter & Kramer 2006). The demand for a positive response for CSR is asked of all companies regardless of the sector and size. Looking at the construction industry, its activities are highly prominent in communities where they are operating. The typical construction activities such as mineral extraction, construction, maintenance and demolition cause serious inconvenience, disruption to the general public and natural environment (Barthorpe, James & Taylor 2004). This situation if handled improperly can result in the ire of the community. On the other hand, accepting the high visibility and impact of the activities of the construction industry may become an opportunity for the company to build a positive relationship with the stakeholders in the public arena where they are conducting their affairs (Barthorpe et al. 2004). In this regard, this research will look into the practice of corporate social responsibility vis-a-vis Balfour Beatty, one of the largest construction companies not only in the UK, but also in the world. It asserts that upon observing the CSR response of Balfour Beatty, it can be attested that corporate citizenship is not a linear progression, but that it is possible for a company to be at various stages in different elements of CSR at the same time. Likewise, regardless of the intent of the company in adopting CSR, (this is significant to note because it is one of the arguments against CSR, e.g. Lin-Hi 2010), companions continue to respond to it in a positive way even if they get involved in some ‘unscrupulous activities’. This is significant as it serves as a lesson not only for the company involved, but also for all organisations. The project has the following structure. The first section is the introduction, which contains the focus and structure of the study. The second section of the project will deal with Balfour Beatty and how effective is it in aligning its goals and conduct with CSR. For the analysis, Mirvins and Googins’ Stages of Corporate Citizenship will be used. Meanwhile, the third section of the project will address a more in-depth look in some of the elements and stages of Mirvins and Googins’ Stages of Corporate Citizenship vis-a-vis Balfour Beatty Plc. Finally, the fourth part will be the limitations and conclusion of the study. In the end, it is the intention of the study to gain a better understanding of CSR by looking into the CSR of Balfour Beatty Plc. CSR and Balfour Beatty: A Demonstration of Corporate Citizenship Balfour Beatty PLC is a British construction, engineering, military housing, rail and investment services company. It is one of the largest construction company in the UK and the 15th in the world. It belongs to FTSE 250 index. The company services customers around the globe, primarily in the UK, the United States, Australia, the Middle East and South-East Asia (www.balfourbeatty.com). The headquarters of the company is in London, United Kingdom, and currently, it employs around 50,000 people worldwide. For 2010, there is increased revenue. In 2009, the company’s income is $ 8,954 billion, while in 2010, the revenue is $9, 236 billion (www.bloomberg.com). The important personalities in the company are Steve Marshall, the Chairperson, and Ian Tyler, the Chief executive. In 2009, the company was embroiled in a scandal. It was found to be a subscriber to Consulting Association, which is now prosecuted in the UK by the Information Commission because of breach in the Data Protection Act (www.guardian.co.uk). It had a secret database of construction workers’ details including union membership and political affiliations (www.guardian.co.uk). This exceedingly brief description of the company provides a bird’s eye view of the current financial status of the company as well as some of the recent problems the company encountered. Applying Mirvins and Googins’ Stages of Corporate citizenship to Balfour Beatty, the Sustainability Report 2009-2010 of the company has been used as the source for the analysis performed for the company. For corporate citizenship, the Balfour Beatty PLC is primarily moving between being engaged (stage 2), innovative (stage 3). It is clear in their Sustainability Reports that the company is consciously undertaking environmental programs that will reduce their carbon footprint, recycle waste, going green in their building structures, less water consumption and responsible procurement of timber. However, for 2010, the company has increased carbon emission, water consumption, waste and their procurement of responsible timber declined. They are between Stage 2 and 3 because, in the full report, they have undertaken programmes that ensure environmental protection and they have performed stakeholder consultations and yet, they have increased their waste at the same time. This problem has to be addressed by the company, as it appears that their existing environmental programs are not delivering the desired results. For its strategic intent, in the report the company constantly refers to creating values (Stage 3), however, as to what is the purpose of the value, it is unclear. Nonetheless, what is clear is the profit value that is reported since they have entered into new markets and have established concrete actions that will encourage investors. In terms of leadership (Stage 4?), according to their 2010 report, the leadership has taken active participation in harnessing the ethical standards being set by the company. They are championing the ethical changes that are being integrated in the code of conduct of the company. However, the ‘how it is being done?’ is ambiguous. This is raised because it is easy to claim that the BOD and senior management are at the forefront for ethical change, but as to how it is achieved “you leave it to the people” (Sustainability Report 2010) is unclear. For issues management, the company after the tumultuous event of 2009, the company, has implemented changes in its Code of Ethics. They are working closely with third parties such as Transparency International, Institute of Business Ethics, the Anti-Corruption Forum, and British Standards Institute on the development of a British Anti-Bribery Standard. They have also established the ethics helpline - www.bbethicshelpline.com. People can use the helpline for support and platform to express any irregularities and other whistle-blowing cases without any risks on the life and job security of the person reporting the unlawful incident. Moreover, the company has started to implement procedures that comply with the UK Bribery Act and they have taken careful measures in adopting ethical standards in their activities and dealing with employees, suppliers and compliance officers. In this regard, the company has taken steps in putting into practise ethical standards. In addition, the company has laid down explicit policies on how to involve the stakeholders that they have identified. In fact, they recognised that they can only maintain sustainability if the identified stakeholders are continuously engaged. This is what they have done in 2010 and they intend to keep this strategy until 2012. As such, for the company’s stakeholder relationships, they are endeavouring to establish partnership with them (Stage 4?). However, it should be noted that engaging the stakeholders via keeping the communications open is a strategy that is relevant at all stages. Again, as observed, they speak of the concept of partnership and involvement of the stakeholders, but what they have undertaken is simple communication and engagement with the identified stakeholders. An exception has been noticed. The senior management has conducted over 200 meetings with the investors, an investor workshop has been carried out, and various means of information dissemination to the investors have been performed (Sustainability Report 2010). Whereas, comparing it with the employees, what has been stated is that regular meetings with employee representatives have been made and that communications through newsletters, workshops, surveys and other venues of getting feedback from the employees have been conducted. There is an obvious gap in their approach in engaging their individual identified stakeholders. In terms of Transparency, the company is between stages 3 and 4. They have undertaken public reporting and in their reports, they have consistently informed and assured the reading public of their intentions, plans and aims. However, this does not imply that the company has made full disclosure. In fact, the 2010 Report is silent about the 2009 scandal that has been mentioned. Table 2 Initial reading Elements Stage 1 Elementary Stage 2 Engaged Stage 3 Innovative Stage 4 Integrated Stage 5 Transforming Corporate Citizenship ? ? Strategic Intent ? Leadership ? (?) Structure ? Issue Management ? Stakeholder Relationship ? (?) Transparency ? ? The table shows the summary of the CSR analysis of Balfour Beatty Plc using Mirvins and Googins’ Stages of Corporate Citizenship. It is observed that the CSR development of the company is not solely reliant on one particular stage. In fact, there are elements wherein the company seems to straddle two stages. At the same time, there are uncertain stages, since, the data presented in the full report are using terminologies attributed to the marked stage, but, upon closer evaluation, there is a doubt regarding the actual position of the company. Moreover, it affirms what Mirvins and Googins (2006) claim, that CSR evolution is not progressively linear and that it is possible for the company to be at various stages of CSR in different elements. On the other hand, it also affirms that Balfour Beatty Plc seriously takes the demands of CSR and that they continue to address issues and implement programmes that will enhance their CSR standing. A More In-Depth Look A fundamental change adopted by Balfour Beatty Plc is the creation of the Code of Conduct, which encompasses stakeholders’ relationship, issue management and leadership. The company has come up with comprehensive procedures on what to do when in doubt regarding the ethical and legal repercussions of actions. They have also created platforms wherein the employees can ask, seeks guidance, report any irregularities, learn, and be educated regarding the Code of Conduct. Moreover, they have specifically laid down what is expected of each employee, what they are not going to do, and in cases, they have encountered any wrongful acts or irregularities what they should be doing. This is an immensely significant development because it provides an unequivocal response to the ethical issue that exploded in 2009 and a vision as to what the company intends to be known. The Code of Conduct what the company wants to become in the face of challenging ethical issues. It shows leadership since; Ivan Tyler is himself, leading the ethical transformation that is envisioned by the company. The ethical transformation is built on the principles of integrity, teamwork, excellence and respect. These principles serving as the ethos in the company’s conduct create a new standard in dealing with suppliers, competitors, co-employees, management, customers and other identified stakeholders of the company. This move has an impact on the leadership, issue management and stakeholders’ relationship. In terms of leadership, the Code provides a clear demonstration of who is at the forefront in their effort in transforming the company in establishing ethical relationships with all the stakeholders and dealing of the organisation. Concerning stakeholders’ relationship, the Code has set the clear ethical standards on how the relationship will be conducted. It is not just abstracted principles that are being elucidated, but also concrete actions are being clarified. In fact, it has been repeated several times that ‘in case of doubt, ask’. This shows that the company sees the ethical transformation, not as an easy task, but that it requires the concerted effort of the entire company to turn into reality the principles of integrity, teamwork excellence and respect. In terms of issue management, the Code offers both a present response and a future direction for the company. It is considered as a present response in the face of the issue of 2009. The Code provides the guide on what to do and at the same time, it gives the ethical fundamentals of what is expected in the activities and conduct of the company in the future. Although, there seems to be an inconsistency in terms of the position ‘you leave it to the people’ (Sustainability 2010) and ‘in case of doubt, ask’ (Code of Conduct 2010) policies, what can be done is to thresh the apparent inconsistency and find the means where the two may be applied without necessarily creating a conflict. Table 3 New Reading Elements Stage 1 Elementary Stage 2 Engaged Stage 3 Innovative Stage 4 Integrated Stage 5 Transforming Corporate Citizenship ? ? Strategic Intent ? Leadership ? Structure ? Issue Management ? ? Stakeholder Relationship ? Transparency ? ? This table shows that there is a change in the initial reading of the CSR of Balfour Beatty the moment the Code of Conduct, which has been published in 2009, is included in the analysis. This change is significant as it clarifies the status of Balfour Beatty on the elements of leadership, issue management and stakeholders’ relationship. It has transformed their standing in such a way that the obvious ethical position of the company has been clarified. The ethical vision and approach of the company has been given the attention, which is necessary for it to be realised. Finally, through the Code the intent of the company has been expressed, Our reputation is a key business asset – indeed, it is fundamental to our long-term success. It gives our customers, employees, partners, suppliers, investors and the many communities that we serve, the confidence to trust us and do business with us... I will always support you doing the right thing. (Tyler 2009) The Code together with other Reports of Balfour Beatty shows the fact that CSR is not a single issue. Rather, it is an interconnected issue that companies, like Balfour Beatty, has to address in order to sustain the company’s success. CSR is a vital component as Balfour Beatty continues to establish its niche in the global construction industry. Moreover, it shows that even if Balfour Beatty subscribes to CSR, it does not make it a saint. This is being highlighted because sometimes people may view CSR as turning companies into saints. Instead, the experience of Balfour Beatty shows that companies can still commit gross mistakes, but the difference now is that they can amend their errors, and more importantly, people are informed of the errors that companies may have committed. Thus, giving the stakeholders, especially customers and investors, the necessary information as they decide whether they will continue supporting Balfour Beatty in particular and other companies in general. In this sense, CSR is not only lodged at the shoulders of companies like Balfour Beatty, but it is to be carried by all stakeholders of Balfour Beatty. The response of Balfour Beatty to ethical issues raised against it is commendable and in some degree effective; however, more needs to be done in order to remove apparent inconsistencies in their policies. Room for Improvement In the above analysis of Balfour Beatty, it has been observed that their progression in terms of CSR compliance is not linear. On the several elements identified by Mirvins and Googins (2006), Balfour Beatty is on different stages on different elements. In this regard, the following are some of the suggestions to further improve the CSR standing of the company, which is its goal for 2011-2012 (Balfour Beatty 2010). The following are the recommendations. They must remove the apparent inconsistencies in the policies pertaining to the ethical standards of the company. The “you leave it to the people” and “ask when in doubt” can be combined to create a clearer programme on how the ethical standard may be implemented. For example, the Code of Conduct must not only be an itemisation of what the company is and what they are not, it should contain procedures and trainings on how employees may learn and arrive at ethical decision making. This is necessary since ethical issues are not a black or white issues. The management should include more meetings with the employees. They were able to conduct 200 meetings with investors aside from the other approaches that they have adopted in engaging the investors. The vigorous engagements for investors should also be applied in relating with the employees, third parties and other stakeholders. This is necessary since only in having a genuine relationship with other stakeholders that SRInvestors may be encouraged. Established more credibility by being more transparent and creating platforms that will address the issue of human rights, since, affirmative actions for human rights is not only about securing the health, work, integrity and quality of life of the workers, but it also includes applying ethical standards and respect for human rights in all dealings of the company. The 2009 scandal shows that the company has the tendency to enter into illegal and immoral actions in pursuit of its goals. Finally, the company has to learn that CSR is not only to secure the success of the company. It is a responsibility of organizations, especially, those who are in the construction industry, since; the industry has high-visibility and high-impact in the communities where they are working. CSR is not just propaganda. If it is seen in that way, it defeats its purpose. CSR is simply being responsible for the actions and consequences of the activities of the company. Limitations Some limitations were encountered during the conduct of the study. The first limitation was the used of Mirvins and Googins’ Stages of Corporate Citizenship. This was considered as a limitation because there were other existing frameworks that may be used, but the researcher chose to analyse Balfour Beatty within the Mirvins and Googins’ paradigm only. The second observable limitation of the study was the methodology used and the gathered data. All of the data used in research were secondary data, and the methodology applied was documentary analysis. In this regard, these identified limitations may be overcome in the future by incorporating other conceptual frameworks wherein the stages of CSR may be analysed for comparative study. Another possible option is to apply Mirvins and Googins’ Stages of Corporate Citizenship to several companies in order to have a wider range of subjects to be analysed. Furthermore, when to the methodological approach, it is possible to use qualitative, quantitative or mixed to have a more in-depth view of the subject matter of the research. Conclusion CSR is a highly significant tool that secures the interests of all the identified stakeholders of the company. Its issues pertinent to the broad definition and scope of CSR points to the fact that it is multidimensional and can be approached from different points and perspectives. This condition gives rise to the fact that there is a need to identify the legitimate stakeholders of the company. In this way, the company can authentically respond to the actual concerns of its stakeholders. As such, the study proposes that the CSR be understood as the vehicle wherein the concerns of various identified stakeholders of the company are given the arena for solutions to their issues. Thus, through this arena, collaborative efforts may be undertaken and the possibility of attaining sustainable development for all parties concern may turn into a reality. Balfour Beatty Plc shows the reality that companies address CSR issues in varying degrees. The issue raised by the 2009 scandal has not been given appropriate venue for clarification, but it has also created the Code of Conduct that now defines and directs the company’s ethical standards and ethos. 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