Toyota Motors Europe - an Environmentally-Responsible Business - Coursework Example

Toyota Motors Europe: An Environmentally-Sustainable Business? Introduction Business activities and the environment are becoming more and more intertwined. When the Industrial Revolution took off, the possibly catastrophic impacts it had on the quality of the environment may not have been as obvious as they are now but the accumulated effects are grievously felt by the present generation. The changing environment is also reflected in the changes that have occurred in businesses – new businesses emerged, environmental regulations modified existing ones, industries adapted to certain environmental conditions, resources have been minimized, etc. (Blair & Hitchcock, 2001). Businesses are becoming increasingly influenced by the environment as new environmental legislations set the new standards that ultimately affect how businesses are conducted. Since the 1960’s, there has been a steadily growing concern for the environment (Ritchie & Hayes, 1998). The clamour for businesses to shoulder their share of environmental responsibility has become the driving force for such businesses to clean up their image. Environmental concern has been dictating, to a certain extent, the way businesses were done and this has never been more true than they are nowadays. The best example of such an intertwined relationship between business and environment is depicted most clearly in the automobile industry (Hawken et al, 1999). In the late 19th century, automobiles started rolling out of mass production lines and started changing the world – roads were paved, fossil fuel was harvested, and air pollutants thickened the air, to name a few (Hawken et al, 1999). These effects led to other changes as well particularly in the mid to late 1900s – tension between oil-producing and oil-consuming countries, increased military spending, the greater divide between rich and poor, deforestation, increased health risks due to airborne pollutants, etc. (Hawken et al, 1999). As the 20th century drew to a close, the automobile industry was choked up with stiff competition, dwindling market-base, and little innovations (Hawken et al, 1999). The environmental question – the sustainability of a business-as-usual economy – opened up new possibilities for automakers to innovate. It also opened doors to a new market: the environmentally-concerned buyer. Image is marketing and the better the image, the better the sales. The auto industry is one of the major contributor to the environmental problems and they have been thrust into the limelight especially with the very imminent threat of global warming of which carbon dioxide – a huge chunk of which is exhausted by automobiles – is the primary cause (Hawken et al, 1999). To clean up their image, automakers scrambled to be at the forefront of alleviating the environmental concerns. And nothing gets the message across better than a certification from a world-renowned and widely-accepted third party accrediting body – certification that, at a glance, tells an entire story of the company who is credibly and maybe even admirably environmentally-responsible. This is why environmental-consciousness and accountability is equated with environmental management systems (EMS) such as the ISO 14001. For Toyota Motors Europe (TME), better environmental performance guided and verified by EMS is a corporate social responsibility and is their foremost contribution towards sustainable development (TME, 2009). Being one of the top car manufacturers in the world, and thus a business leader in its own right, it is imperative to examine how much Toyota has achieved of its promise to be an environmental leader in the industry and how has its environmental performance translating to impacts that benefit the environment and, ultimately, advancing sustainable development. TME’s environmental management strategies While environmental management system is a relatively recent concept, environmental protection is not. The effects of pollution could not be ignored or hidden and environmental standards have long been in place to ensure that industries take the necessary steps to address them. Economic considerations have constrained the industries to opt for end-of-pipe solutions – that is, the pollution problem is cured after it was produced rather than prevented (Andrews et al, 2003). Since conventional practice was cheaper than reinventing the business, there was no incentive for such a business to be proactive (Brophy et al, 1995). Environmental management strategy and ISO 14001 In recent years, however, end-of-pipe solutions as an environmental management strategy have become obviously inefficient and have provided inadequate environmental protection (Andrews et al, 2003). Progressive companies and industry leaders recognized the need for a more proactive approach (Porter & van der Linde, 1996). In the changing times, environmental management has become less about regulatory compliance and more about corporate strategy (Meisner Rosen, 2001). Top management of multinationals no longer saw that environmental compliance as a cost-prohibitive liability but a tool to make their operations more efficient and to gain for them a competitive advantage (Porter & van der Linde, 1996). This is the position where Toyota saw itself; EMS, as with an increasing number of companies, was seen as the tool to bring this about (ISO, 2004). Barrow (1999) compiled different definitions of environmental management and for the purpose of this review, the one given by Sharatt (1985) seems most appropriate: environmental management is the management of the environmental performance of organizations, bodies, and companies. Ammenberg and Hjelm (2002) differentiated this definition from others by assigning it the term “corporate environmental management”. It must be integrated into the organization’s management system and used to develop and implement its environmental policy to manage its environmental impacts (ISO, 2004). Furthermore, it must be built on a holistic view that encompasses the whole range of product life cycle (ISO, 2004). ISO 14001 is the most recognized framework for EMS and since its introduction there have been a surge in the number of companies who implemented EMS (ISO, 2004). ISO 14001 doesn’t merely focus on monitoring and measuring environmental performance; to be certified, a company must also be committed to continuous improvement. For this to be achieved, the EMS must be based on the Plan-Do-Check-Act (PDCA) cycle (ISO, 2004). Toyota’s EMS and implementation of the PDCA cycle Kaizen, or continuous improvement, has always been one of Toyota’s guiding principles in all of its operations (TME, 2009). The PDCA cycle is not a stranger to their operation as their EMS is supported by it (TME, 2009). The planning phase of the EMS was devoted to the identification of the company’s significant environmental aspects – or the element of an organization’s activities that can interact with nature (ISO, 2004). These aspects are crucial for the formulation of their environmental policy as required by ISO 14001, a certification which TME has acquired in 2001 (TME, 2009). This policy, which sets the targets and objectives of the EMS, strongly highlights emission reduction, resource minimization, energy reduction, zero waste disposals, compliance with standards, quest for the ultimate eco-car, improving environmental performance from design to disposal, creating an environmental mindset among their stakeholders, and raising environmental awareness. The “Do” phase sees the implementation of measures to achieve the objectives set by the environmental policy (ISO, 2004). TME’s environmental performance falls under five categories: tackling energy challenges and global warming; improve recycling of resources, eliminate substances of concern (SOC); improve atmospheric qualities; and expand environmental management (TME, 2009). In their 2009 sustainability report, TME reported significant reductions in CO2 emissions, energy consumptions, waste disposals, water consumptions, and use of SOC. They also reported compliance to End-of-Life Vehicles (ELV) Directive (EU ELV Directive 2000/53/EC), and the standards set for volatile organic compounds (VOC), particulate matters (PM), and nitrogen oxides (NOX). As well as that, they have been aggressively developing more fuel-efficient vehicles and promoting clean energy vehicles like the Toyota Prius. To expand their environmental management, their plans to automate the EMS are underway and they have set environmental guidelines for their suppliers and retailers. The report also laid out the successive steps they need to take to continuously improve their environmental performance by setting new and more ambitious targets. Whilst it was reported that TME has achieved significant reductions with regards emission – e.g., CO2 – further reading of the report would reveal that some achievements were actually below the targets set by Toyota for itself although the emissions themselves were well within the accepted levels set by regulatory bodies (TME, 2009). Such information is often the result of the “Check” phase of the EMS. The “Check” phase pertains to the monitoring of environmental impacts in order to evaluate the environmental performance of the organizations (ISO, 2004). Toyota conducts such monitoring through ISO 14001 audits as well as through internal audits (TME, 2009). The last phase in the cycle is the management review (“Act”) which will assess the suitability, adequacy, and effectiveness of the EMS (ISO, 2004). The evidence of this in TME’s 2009 sustainability report was in the new targets they have set for the following year. It may be presumed that part of their future technological developments would be influenced by such a review. It also asserted their commitment to continuously improve. Toyota’s implementation of the 5Rs Some improvements were made voluntarily while some were mandated by stricter legislations; still others have been market-driven. In Toyota’s case, a good example of how their EMS works would be how they are implementing the 5Rs – refine, reduce, reuse, recycle, recover – across their activities, particularly in their supply chain, operations, and marketing which is key to their waste management programs (TME, 2009). Along its supply chain arm, Toyota imposes a set of guidelines, the Environmental Purchasing Guidelines (EPG) which apply to all their raw materials suppliers (TME, 2009). The EPG is a way for Toyota to share the knowledge it has gained in its comprehensive and structured management approach to environmental issues. The EPG spells out Toyota’s aims for environmental protection in Europe and specifically require their suppliers to implement the 5Rs by controlling substances of concern, ensuring the safe transport and storage of materials, and ensuring that the packaging is returnable and recyclable (TME, 2009). Toyota’s requirement of returnable packaging has resulted to a 4.1% reduction in packaging wastes (TME, 2009). Suppliers must also declare the composition of the materials they supply so that Toyota can plan for its reusability and recyclability (TME, 2009). Toyota also required their suppliers to be ISO 14001-certified; so far 85% have been accredited and the accreditation of remaining 15% is underway (TME, 2009). In its operations, TME’s manufacturing plants are ISO 14001-certified and a major feature of their environmental management system is their implementation of the 5Rs all stages Toyota’s production (TME, 2009). Resource minimization is incorporated at the design phase and is further scrutinized and improved throughout the production phase as they aim for zero waste disposal and reduced energy and water consumptions. Toyota products are already free from heavy metals such as lead, mercury, cadmium and hexavalent chromium (TME, 2009). While most plastics used in cars are difficult to recycle, Toyota has taken the initiative to develop a special recyclable plastic called Toyota Super Olefin Polymer, or TSOP (TME, 2009). This car plastic that can be used many times over is used in Toyota car bumpers, dashboard, and other parts Toyota has also set up waste collection systems where retailers and customers can send car parts that have to be replaced such as batteries and tyres (TME, 2009). Toyota retrieves these parts to be reconditioned and remanufactured so they can be used again. Toyota has continuously set, met, and improved standards with regards to their energy and water use so they can continuously refine their operations; one proof of that is on how they continue to innovate with respect to the recyclability of the raw materials for their products (TME, 2009). At the end of a vehicle’s life, Toyota has assigned take-back centres responsible for ensuring that disposable parts (which have been steadily decreased and replaced with more eco-friendly alternatives) are disposed of properly and that recyclable and re-usable parts are recovered to be sent back to the manufacturer (TME, 2009). Toyota has been successful in implementing the 5Rs in their manufacturing plants as evidenced by the fact that they have achieved their target of “zero waste to landfill”, and their next step is to promote it across all production sites. As part of this commitment, Toyota is also targeting to purchase their energy requirement from renewable sources (TME, 2009). In fact, 100% of the energy requirement of their Belgium site is supplied by renewable sources (TME, 2009). TME has also been pushing for the ISO 14001 certification of their National Marketing and Sales Companies or NMSC (TME, 2009). Of their 31 NMSC, 26 have been accredited and Toyota is targeting full compliance by 2010 (TME, 2009). TME has also encouraged and provided guidelines for their logistics and sales and marketing affiliates to strive for resource use minimization and this initiative is well underway. For 2008, Toyota reported that the CO2 emissions of their NMSCs increased from 12,585 tonnes to 13,585 tonnes but they are now starting a program which will require their retailers to do an energy audit to identify energy reduction potentials with end goal of minimising energy use and ensuring energy efficiency (TME, 2009). Some new retailers are designed to have the lowest environmental impact and to become CO2 neutral. Their retailers are also tasked to send back to Toyota the parts that they recover so it can be recycled. It is also Toyota’s assurance to its clients that their car is fully compliant with legislative and regulatory standards from the design phase to its operations and even to its disposal (TME, 2009). Criticism on EMS and how it applies to TME Implementing EMS certainly looks like a win-win situation and its increasing popularity would seem an indication that many companies and organizations are lauding the positive benefits (Porter & van der Linde, 1996; Steger, 2000; Meisner Rosen, 2001). But some critics have a different view (Krut & Gleckman, 1998; Spencer-Cooke, 1997). Specifically with ISO 14001, an oft-heard criticism is that the certification process itself does not measure the actual environmental performance of an organization (Krut & Gleckman, 1998). For one thing, ISO 14001 specifies what requirements an EMS must meet but it does not dictate how it must be met (ISO, 2004). ISO 14001 for most companies is also more focused on the development and documentation of policies and processes (Krut & Gleckman, 1998). Furthermore, ISO 14001 does not specify the guidelines for assessing impacts (Ammenberg & Hjelm, 2002). The absence of a universal tool for comparative assessment leaves a lot of room for subjectivity and the assessment largely depends on the assessor (Whitelaw, 1997). The assessment of environmental aspect is probably the most important part of the standard (Whitelaw, 1997) as the subsequent environmental policies, targets, performance indicators, and responsibilities hinge on identifying which environmental aspects are significant and requires EMS. In the case of Toyota, their environmental performance seems exemplary at first glance because achievements are reported in percentages – percent reduction in emission, percent compliance, etc. But on second thought, that does not really tell us anything about their environmental impact. What do these figures translate to in terms of climate change mitigation? Since EMS is a management tool to achieve sustainable development, which aspects of sustainable development have directly or indirectly benefitted from the environmental performance of TME? It would require but a short academic exercise to conjecture the impacts, but how do we quantify those impacts? These are the kinds of information that the sustainability report doesn’t divulge; in the first place, these may be the kind of information that they did not quite bother with. After all, even if EMS was supposedly about accruing environmental benefits, the indicators stop at how Toyota is achieving their target. It does not go beyond that to answer how those targets translate to impacts. Such impacts are largely assumed; that is, if EMS is implemented in concert with the organizations targets – and even exceeding them – then the negative impacts are mitigated but there is no requirement for verifying it (Rondinelli & Vastag, 2000). Steger (2000) reported that the use of EMS has led to higher degree of compliance to legal standards, a more comprehensive strategy to result to a win-win solution of achieving ecological and economic benefits, and even to instigate a more effective organisation flow. In a competitive market, it would be the end of a particular company if they cannot keep up with the competition. Effective EMS has given companies who implement them a competitive edge so much so that most companies use the accreditation as a symbolic effort to improve their image (Bansal & Clelland, 2004). In the example of Toyota, being the first to release an efficient and generally well-accepted hybrid car has certainly elevated the company’s image and image can get a company a long way. When Toyota claims its place as an environmental leader, it will not be too difficult for the consumers to accept that as fact. All this is good advertising. However, as Steger’s (2000) study suggested, a majority of companies who have implemented EMS claimed that innovations that take into account environmental sustainability would have happened anyway, even without the EMS. For one, legislated standards require them to set their targets to within acceptable limits. For another, the environment has become a major influencing factor with industries and businesses (Blair & Hitchcock, 2001). The first generation Toyota Prius was developed as early as 1993 (Hawken et al, 1999) and there was yet no ISO 14001 certification then. Also, most of Toyota’s reported environmental performances fall within compliance requirements (TME, 2009). Lastly, companies have recognized resource minimization not just as an important environmental management strategy but as a significant business strategy which translates to savings and overall efficiency (Porter & van der Linde, 1996). Conclusion and recommendation Ammenberg and Hjelm (2002) suggested that ISO 14001 may very well lead to reduced environmental impact but it does not exactly guarantee good environmental performance. Still others claim that environmental performance could not be measured by ISO 14001 alone (Krut & Gleckman). This is exacerbated by the subjectivity inherent in the identification of environmental aspects which subsequently affects the identification of performance indicators (Whitelaw, 1997). If environmental performance could not be measured reliably, then EMS is not exactly the ideal tool to effect sustainable development (Spencer-Cooke, 1997). At best, EMS can provide a structured and systematic way of dealing with the environmental concerns of an organization (Tibor & Feldman, 1996), provide ambitious companies such as Toyota with a benchmark to identify weak areas in their management strategies (Sunderland, 1998), and improve organisational efficiency with regards environmental issues (Ammendberg & Hjelm, 2002). It does not mean, however, that ISO 14001 or EMS is as inefficient and inadequate as the environmental management prototype it replaced, the end-of-pipe pollution control. EMS responded to a market demand; consequently, market perception will keep EMS a viable management tool as it still is associated with environmental responsibility, customer consideration, cost savings, business opportunity, and therefore good financial returns (Kirkpatrick & Pouliot, 1996). They must then take their environmental responsibility to the next level. It is not enough that they are reporting “environmental performances” by how much they are achieving without even a reference to which baseline data they are comparing it with; environmental performances must be made more concrete and environmental impacts more clear-cut, not merely assumed (Note: Since this is already the Conclusion, this statement is a personal opinion – a consolidation of what have been learned from the essay. Since it is an opinion, it does not have a reference. If that is unacceptable, I suggest this part should be deleted). What is probably ideal with the strategy of Toyota is that they take their environmental responsibility beyond the confines of their operations unlike most companies who implement improvement programmes only within their operational boundaries (Handfield et al, 2004). Toyota’s commitment to addressing environmental sustainability rightly includes the supply chain, the marketing, the after sales and even the disposal. More than that, Toyota also takes its environmental responsibility outside the industry (TME, 2009). This can be seen in the initiatives that Toyota is funding across the globe some of which have direct environmental benefits – sustainable reforestation, afforestation, rural development, etc (TME, 2009). Amidst companies that use EMS to polish their image, and even amidst companies whose EMS focus more on the documentation of environmental policies rather than acting on them (Krut & Gleckman, 1998; Bansal & Clelland, 2004), Toyota stands out as a company that is serious about performing their environmental responsibility. This can be seen in the way they strive to meet the targets they set for themselves which in most instances even exceeds those set by legal standards. Whilst there may seem some ambiguity in the causal relationship between what was accomplished with what its environmental impacts are, the fact remains that Toyota is committing itself to continuous improvement. There is a promise there that we will be seeing better and more concrete environmental performances and impacts in the future when Toyota realize their ultimate eco-car, their zero emission targets, the full compliance of all affiliates, and a more expansive reach of their environmental awareness campaigns (TME, 2009). Toyota, by pioneering the hybrid market, has already hit the ground running when it formalized its EMS with an ISO 14001 certification. Using the yearly achievements as benchmarks, Toyota’s trajectory will indicate that it is indeed continuing its work towards a contribution to sustainable development that is more direct and measurable (Note: Since this is already the Conclusion, this statement is a personal opinion – a consolidation of what have been learned from the essay. Since it is an opinion, it does not have a reference. If that is unacceptable, I suggest this part should be deleted). 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