Strategically Positioning the Ford Company to Meet the Environmental and Sustainability Challenges of the Future - Assignment Example

MEMORANDUM Subject: Strategically Positioning The Company to meet the environmental and sustainability challenges of the future This presentation outline depicts current company policies and resources with regard to sustainability. Then, global trends are presented and recommendations for Ford are given. It will be shown how Ford needs to start predicting changes in climate and customer demand, instead of only following other companies and trends. Company Policy Company’s goals and commitments focus on several issues. In 2007, Blueprint for Sustainability was launched (Mulally). The blueprint outlined goals and commitments of the company: sustainable Ford, climate change, mobility in the urban areas, human rights with regard to treatment of workers and vehicle safety (Ford’s Goals, Commitments and Status). Within each group the company focuses on a certain issue. In case of climate change, the focus is on near-, mid- and long – term plans to meet company’s CO2 emissions (Blueprint for Sustainability). Fuel efficiency and decreased GHG emissions are the priority in company’s approach to environmental issues (Mulally). The main goal of the company is profitable growth. The company invests in “the development of a full range of vehicles with the best quality, fuel efficiency, safety, smart design and value” (Mulally). On each step of the value chain effects on environment, economy and social aspects are identified together with the principal agents involved in that particular step (Value Chain and its Impacts). Stakeholders or principal agents are: employees, customers, dealers, suppliers, investors and communities (Who are our Stakeholders?). In turn, such strategy enables the company to “continue moving forward toward our goal of profitable growth” (Mulally). Sustainability reporting is the basis of organizational learning at Ford (Sustainability Report). The company applies structured materiality analysis. This approach identifies factors with highest potential impact on the company and shareholders (Sustainability Report). For example, issues of high potential impact on company but low concern to stakeholders are: non – GHG emissions, waste generation and management, employee morale and teamwork and commodity prices. There have been identified 23 issues of high importance to stakeholders (Materiality Matrix). By 2009, the Blueprint became a success. US Environmental Protection Agency (EPA) published in 2009 a report stating that Ford made largest progress in improving overall fuel economy than any other major automaker since 2004 (Mulally). The company performed above average in 2009. The Corporate Sustainability Assessment assessed company’s performance across economic, environmental and social criteria. The scale was from 0 to 100, with latter being the best score. Company score across economic dimension was 72, then 84 across environmental dimension and 79 across social dimension. Ford outperforms the industry average in 15 indicators. However, in three indicators Ford underperformed the industry average: talent attraction and retention, human capital development, and brand management. Ford has developed institutional capacity to implement sustainability. Ford has structures that manage sustainability. The goal of this structure is to ensure accountability for sustainability. Board and the Executive comprise the Sustainability Committee, whose primary responsibility is to review strategic sustainability issues (Sustainability Governance and Integration). The Sustainable Business Strategies office “coordinates corporate-wide sustainability strategy and activities” (Sustainability Governance and Integration). The office is also in charge of reports and stakeholder engagement, as well as integration of sustainability into all parts of the company (Sustainability governance and Integration). The company also developed structures dealing with specific issues, which are of importance (Sustainability Governance and Integration). The Sustainable Mobility Governance Forum and Environment and Safety Engineering are such examples (Sustainability Governance and Integration). However, the company integrated, rather than created new systems and processes (Sustainability Governance and Integration). Managers and Executive compensations depend on the progress they make in promoting sustainability (Sustainability Governance and Integration). Ford's weekly Business Plan Review (BPR) meetings deal with sustainability, among other issues (Sustainability Governance and Integration). CEO is in charge of Special Attention Review and Automotive Strategy meetings at which potential sustainability issues are identified (Sustainability Governance and Integration). The company also has directives and corporate policies dealing with different aspects of company activities (Sustainability Governance and Integration). Lastly, sustainability issues are represented in systems and processes used by the company, such as ISO 14001 (Sustainability Governance and Integration). The company is focusing on water as one of the biggest challenges to the planet and company. Water is a human right, but it becomes scarcer every day. In 2000, Ford launched the Global Water Conservation Initiative. Since then its, water consumption decreased by 62.4 percent (Water: More Than Just Environmental Concerns). The plant in the Sonoran Desert decreased water consumption after the area experienced a drought and the population suffered (Water: More Than Just Environmental Concerns). However, since operations increased, the company resorted to a biological water treatment system, a Membrane Biological Reactor (Water: More Than Just Environmental Concerns). This way, 55 percent of water was reused (Water: More Than Just Environmental Concerns). Global Trends Sustainability is all the new rage. Globally, sustainability is increasingly adopted among firms, despite the economic downturn and the lack of global initiative in combating climate change (MIT & BCG 4, 7). Companies believe that sustainability will become a source of advantage in the future. Ford’s water projects prove this (MIT & BCG 4). Shareholders increasingly care about sustainability (Makow et al. 6). Even investors consider sustainability when defining their portfolio (MIT & BCG 17; Makow et al. 7). Customers demand environmentally friendly products (MIT & BCG 17). In general, managers are either embracers or cautious adopters. Embracers are more aggressive in funding sustainability (MIT & BCG 5). Cautious adopters focus on short term effects, such as resource efficiency and have not established a business case for sustainability, such as increased profitability through sustainability arguments (MIT & BCG 9). Embracers are large, global companies such as Ford, even though Ford is a cautious adopter (MIT & BCG 9). There are a few leaders worldwide: Walmart, IBM, GE, Google, Toyota and Patagonia (MIT & BCG 10). Ford did not make it to top fifteen (MIT & BCG 10). For many, sustainability is a way to become more resource and cost efficient. According to MIT and BCG survey, most respondents viewed waste reduction and energy efficiency as priorities and most spread activities among firms (7). For some companies, sustainability is profitable. For example, Johnson & Johnson saved 247,000 megawatt hours by decreasing CO2 emissions (MIT & BCG 7). The same company cut waste by 32%, which decreased its waste disposal costs (MIT & BCG 8). Moreover, according to MIT and BCG survey, 70 percent embracers believed they were outperforming their competitors, which they attribute to sustainability (11 - 12). Puma created compostable clothing (Makow et al 8). External chains of processes in companies are targeted as well. Walmart Canada targets suppliers and so plans to save $140 million in packaging (MIT & BCG 8). Consumers are affected as well: Unilever produced laundry products that use less water (MIT & BCG 8). Ford has, similarly, produced more fuel efficient cars. There have even been cases of cooperation among NGOs and companies, as former are experts on human rights and environmental sustainability (MIT & BCG 18). However, embracers lead the way. They have a range of drivers that support sustainability. These are increased margins or market shares, greater potential for innovation and access to markets (MIT & BCG 12). Embracers conduct sustainability analyses to assess potential costs of non – compliance with sustainability (MIT & BCG 13). Larger companies among embracers try to predict future regulatory changes (MIT & BCG 13). Regulatory changes so far indicate that embracers will benefit the most, as they are prepared (MIT & BCG 16). The auto industry views sustainability to be important. According to the MIT and BCG survey, 80 percent respondents from the auto industry responded that they consider sustainability to be important for competitiveness (18). With increased oil prices and perhaps even shortages in the future, profits might depend even more on sustainability. Zipcars, which Ford is a part of since 2011, are increasingly used by younger generations (Makow et al. 11). Electric cars are being invested in as well (MIT & BCG 13). There are analyses that markets for renewable energy, energy efficiency and battery technologies are increasing (MIT & BCG 13). Thus, Ford should become an embracer and lead the way. Why Become an Embracer Sustainability is inevitable. By 2050, there will be nine billion people on the planet (Sandberg et al. 2). Whereas that increase implies more consumers, it also implies problems. The Millennium Ecosystem Assessment found that two thirds of the ecosystem are being degraded or used unsustainably (Percy et al. 2). If the trend continues, resources will no longer be as cheap as they are now (Percy et al. 2). Companies will suffer, as their profits will decrease. Moreover, ecosystems change in abrupt ways (Percy et al. 2). As a result, successful current company policies might have adverse effects on profits in the future. Thus, it is important to become an embracer, as they always innovate and are ahead in innovations. Ford could improve performance on three points on which it underperformed the industry average by becoming an embracer (MIT & BCG 13). Else, Ford will suffer a loss. Customers will turn to ecologically friendlier cars. Reputation and brand image would suffer as governments and consumers will continue embracing ecosystem protection (Percy et al. 9). Costs of inputs would increase through increased scarcity and government regulation (Percy et al. 9). Natural disasters, including conflicts could threaten company facilities (Percy et al. 9). Competition for resources among businesses will also increase (Percy et al.10). Without the capacities embracers possess, Ford will not be able to deal with such problems. Conclusion The next forty years should be marked by a move toward sustainability where ecosystems do not suffer (Sandberg et al. 12). Else, resources will become depleted and businesses will suffer too (Sandberg et al 15). As a cautious adopter, Ford so far does not possess the capacity to deal with unpredictable changes in the ecosystem and customer demands. However, Ford has great potential in its present institutional capacity. Ford needs to be involved in the lifestyle transformation too. Ford needs to become an embracer. Works Cited Blueprint for Sustainability. Sustainability Report 2009 / 2010. Ford Motor Co, 2009 / 2010. Web. 5 April 2012. Corporate Sustainability Assessment. Ford Motor Co. , 2009. Web. 5 April 2012. Ford’s Goals, Commitments and Status. Sustainability Report 2009 / 2010. Ford Motor Co, 2009 / 2010. Web. 5 April 2012. Materiality Matrix. Sustainability Report 2009 / 2010. Ford Motor Co, 2009 / 2010. Web. 5 April 2012. MIT & BCG. Sustainability: The ‘Embracers’ Seize the Advantage. Winter 2010. Web. 5 April 2012. Makover, Joel et al. State of Green Business. GreenBiz.com, January 2012. Web. 6 April 2012. Mulally, Allan. Letter from Allan Mulally. Ford Motor Co, June 2010. Web. 5 April 2012. Percy, Steve et al. The Millennium Ecosystem Assessment. 2005. Web. 6 April 2012. Sandberg et al. Vision 2050. World Business Council for Sustainable Development, 2010. Web. 7 April 2012. Sustainability Report 2009 / 2010: Overview. Ford Motor Co, 2009 / 2010. Web. 5 April 2012. Sustainability Governance and Integration. Sustainability Report 2009 / 2010. Ford Motor Co, June 2010. Web. 5 April 2012. Value Chain and its Impacts. Sustainability Report 2009 / 2010. Ford Motor Co, 2009 / 2010. Web. 5 April 2012. Water: More Than Just Environmental Concerns. Sustainability Report 2009 / 2010. Ford Motor Co, 2009 / 2010. Web. 5 April 2012. Who are our Stakeholders? Sustainability Report 2009 / 2010. Ford Motor Co, 2009 / 2010. Web. 5 April 2012. Read More