Corporate Social Responsibility of the Toyota Company - Case Study Example

Corporate Social Responsibility-The Toyota Company Introduction Corporate social responsibility refers to all the activities that organisations undertake towards improving the welfare of the people where they serve. Corporate entities operate as responsible citizens by undertaking numerous activities with the goal of making profits. Such activities can affect the society positively and negatively. In recognition of the impact of corporate entities on the society, many organisations have put in place important measures for ensuring that they not only gain from the people through profits, but also give back to the society to improve the lives of the people they serve. However, other CSR activities are deeply enshrined in an organisation’s business. They relate to the dedication of the organisation towards an improved society through its activities. For instance, an organisation that focuses on providing food products can carry out CSR activities by ensuring that the products offer important health benefits, as opposed to increasing lifestyle diseases or other related conditions that such foods can be associated with. Another example of corporate social responsibility activities that are directly linked to businesses include the gradual improvement of electronics by a company to be more power efficient such that it can help the world in the push towards better energy-efficient and conscious world (Megumi and Takehara 3). While CSR activities are always well intended, the outcomes of such activities vary from one activity to another and/or from an organisation to another. This paper analyses the hybrid car project, which is one of the most successful CSR activities by the Toyota Motor Corporation in terms of the positive impacts that the activity has had on societies and the business. Toyota Motor Corporation Toyota Motor Corporation is the world’s largest automobile maker and the 12th largest corporation in terms of market capitalisation in the world. In 2012, the company became the first automobile that produced more than 10 million cars in a year (Racz, Muntean and Stan 438). The company has retained this position up to date. The business makes various models of cars, including SUVs, saloon cars, pickups, and trucks. The company has also invested widely in other automobile companies such as Daihatsu, FAW, Fuji Heavy Industries, and Isuzu among others, thus making it truly a globally significant and magnanimous automobile company. With revenues exceeding USD$ 252 billion as of the 2014 financial year, the Toyota Company is a highly profitable establishment. It employs more than 330,000 employees in its plants and offices in Japan and across the world. As a responsible citizen, the Toyota Company has been at the forefront in advancing important projects that are aimed at improving the lives of the people it serves. As a business that is dedicated to making the transportation of people and goods easy through automobiles, the company has invested heavily in technology as a way of ensuring that its automobiles meet the customers’ needs at all times while at the same time guaranteeing that the clients get value for their money(Ghosh and Chitra 81). CSR activities are mostly important in ensuring that the company can achieve credibility and customer loyalty. They are a good approach to confirming that the company uses its resources well to ensure that customers receive the best automobiles within their budget. In 2014, the company established the structure below where several officials were given strategic posts to work in collaboration with other stakeholders in addressing the company’s CSR issues. Source: (Vogel 5) For instance, in the world that is marked by increasing concerns about energy consumption and efficiency, the company’s technologies, research, and development have allowed it to produce some of the most fuel-efficient and affordable car designs in the automobile industry (Lindgreen and Swaen 3). This customer-focused business strategy can be viewed as an important CSR activity. On the other hand, the company has undertaken numerous projects that are not directly linked to business and profitability, but also on the general improvement of communities. For instance, the company has carried many CSR activities that are focused on funding education in developing countries among other activities in the regions where it has operations across the world. Hybrid Cars as a the Most Successful CSR by the Toyota Company In a world where environmental consciousness has been more important than any other time, companies around the globe are required to exercise their role in a manner that will not contribute towards environmental degradation, but instead promote technologies and activities that will guarantee environmental protection and sustainability. With the advent of mass production due to industrialisation and the increasing population, industrial pollution because of human activities is the main contributing factor towards environmental undertakings that endanger the stability of the world’s environment. Greenhouse gases such as carbon dioxide, methane, and the hydrofluorocarbons (HFCs) are some of the most lethal environmentally degrading gases whose effects have been felt through global warming and its effects on the international climate(Barnea and Rubin 73). One of the most contributors towards these greenhouse gases is the motor vehicle or automobile industry, which produces lethal combinations of gases through exhaust gases to the environment. This situation contributes to global warming and consequently environmental degradation. Currently, more than 1 billion cars roam the streets of the world. Each car has its gaseous emissions, which add a share of greenhouse gases that are increasingly contributing towards global warming of the environment. Currently, the transportation sector, which is dominated by the automobile sector, accounts for more than 31% of the 30 billion metric tons of carbon dioxide that are emitted from human activities (Hopkins 34). Indeed, the emissions are increasing. It is expected that if proper strategies towards the reduction of greenhouse gasses are not implemented through strict policy and legislation changes, the effects of greenhouse gases will make the environment almost inhabitable by 2050. The pie chart below shows the carbon emissions in the world based on the source using the 2014 estimates. Figure 1: Chart Showing Carbon Emissions by Source Source: (Hopkins 34) The transportation sector takes 31%, which indicates a significant amount of carbon emission into the atmosphere. In the wake of the dangerous phenomenon that the global warming is threatening to cause, many lobbyists and government agencies have put protracted measures towards reducing the usage of gasoline, which is a major cause of the gases that are emitted from industrial activities and automobile industries(Hopkins 35). The Toyota Company has been at the forefront in ensuring that it produces environment-friendly vehicles. Through such an approach, it has managed to reduce the gas emission to levels that the earth can cope with in order to ensure the sustainability of human activities and the environment. Many terms such as energy efficiency and fuel switching have been used to refer to environmental sustainability and responsiveness. Carbon capture, sequestration, and energy conservation have emerged to provide an important opportunity through which environmentally degrading gasses and emissions can be reduced or controlled. In recognition of the need to put the world on a path towards environmental sustainability, the Toyota Company has invested heavily in cars that have better fuel efficiency and low emissions. The company has invested heavily in delivering family-sized cars to the masses. Besides, based on the technology of fuel switching, the company has allowed a room for the switching of the car’s engine between gas and electricity, hence reducing the amount of fuel that is consumed per mileage and consequently decreasing the amount of emissions to the environment (Barnea and Rubin 74). The Toyota Company’s most fuel-efficient and environmentally friendly cars are referred to as the hybrid cars, which have been at the forefront in revolutionizing the automobile industry towards environmental protection. So far, the company is the world’s leader in the manufacture of hybrid cars, which are majorly in two models, namely, the Prius and the RAV 4 EV. To date, the Prius is still in the production process while the RAV 4 EV was discontinued in 2003. A brief history of Prius shows that the car was first mass-produced from the general market in 1997, following more than two years of intensive research and fine-tuning of the hybrid technology that incorporated gasoline and electricity. At the time, the Environmental Protection Agency (EPA) had put forward new guidelines for what a fuel-efficient and environmentally friendly car ought to have been in terms of emission and fuel consumption (Lindgreen and Swaen 5). The Toyota Company was the first to meet these new guidelines. It was also the first to claim the first automobile ever to produce a hybrid car for the masses. It adopted a technology that was way ahead of its time as evidenced by the number of years it took other companies to begin mass-production of hybrid cars to the market (Lindgreen and Swaen 3). As of 2014, more than 4 million hybrid cars of the Prius design by the Toyota Company had been sold, thus making the car the most successful hybrid car in the world, accounting for 67% of all the sales of hybrid cars in the world. This move is a major success story when it comes to upholding CSR goals of safeguarding the environment. When the company launched its first hybrid car in 1997, the move was a clear sign of its dedication to providing the world with cars that were not only fuel-efficient but also environmentally friendly. Hence, this period ushered in a new era where a motor company was for the first time taking an important corporate social responsibility of ensuring that its activities did not come at a heavy cost to the global community(Racz, Muntean and Stan 440). In the year that followed the launching, Prius was voted the car of the year in Japan. The award was a clear sign of the recognition of the positive impact that the company was dedicated to having on the society. The car’s 1.5-Litre engine could clock 50 miles per gallon (mpg). This fete had not been realised on a commercially available car. The car also used electricity power, which would be alternated with the gas, to make it the first car to use this fuel-switching technology on mass-produced cars (Ghosh and Chitra 85). After gaining popularity in Japan, the company extended this significant social responsibility beyond the borders. In fact, it began exporting the car in 2000 to global enthusiasts who were eagerly waiting to land their hands on the car. It became an internationally popular car. Its success fuelled the Toyota Company to invest even more towards the development of new-generation models of the car. In 2003, the second-generation cars of the Prius model entered the market. It combined major improvements that strengthened the Toyota Company as a world leader in hybrid cars in terms of their popularity, profitability, and environmental friendliness. While still maintaining the same gas capacity of 1500cc, the new model had a better battery output capacity that reached 50kW and hence a better performance of the car when using electrical charges to power itself (Ghosh and Chitra 84). In 2007, the company reached a major milestone where more than 1 million hybrid cars had been sold in the car’s short history of 10 years. The third generation of Prius hybrid cars debuted in 2009 with major improvements in energy consumption and gas emissions. For instance, the car, which then had an improved 1800cc capacity, had a better fuel efficiency of 72 mpg and a gas emission of only 82 grams per mile (Hopkins 39). This advancement was highly environmentally friendly. Available documentation demonstrates that, at a global level, the automobile manufacturer has been able to minimise CO2 emissions into the environment by a massive 34 million tons through the production and distribution of its hybrid car models. The effort is comparable to the combustion of 132,527 railcars of coal or the total liftoff weight of 15,111 fully developed space shuttles (“Toyota Hybrid’s” 1). In the past one year, users of the Prius Liftback hybrid car have contributed to reduction of CO2 emission to the environment by over 20,000,000 tons. Such a huge amount of CO2 emission is comparable to the combined weight of an estimated 3 million fully grown elephants. Overall, it is documented that the introduction of new technologies such as hybrid cars has been instrumental in reducing fuel consumption, which in turn reduces the amount of CO2 emitted into the atmosphere. In Toyota’s case, documented literature demonstrates that hybrid car brands have saved global customers in excess of 3 billion gallons of fuel when conservative figures of gasoline-only powered car models are put into consideration through relevant quantification (“Toyota Hybrid’s” 1). In the absence of the hybrid vehicles, the 3 billion gallons of gasoline could have emitted a substantial amount of CO2 into the environment. Consequently, it is clear that the introduction of the hybrid cars by the automobile manufacturer has been of immense importance in reducing carbon emissions and also in ensuring environmental protection and sustainability. After concentrating on the Prius model since 2010, the company has launched new models of hybrid cars, which are in line with its goal of being the leading car manufacturer of environmentally friendly cars in the world. Although other models of hybrid cars have come up from other automobile companies, the Toyota Company’s hybrid cars account for more than 67% of all the world’s hybrid cars (Racz, Muntean and Stan 441). Despite the fact that new models have emerged, the company has been instrumental in showing that the hybrid cars are the future of automobile industry and that other companies will have to follow suit if they want to remain relevant in the increasingly environmentally conscious world of today. So far, in the footsteps of the Toyota Company, other companies have followed with their models. From 53.7 million hybrid cars in 2009, it is anticipated that over 80 million such cars will be on the roads as shown below. Figure 2: Hybrid Cars Numbers 2009-2020 Source: (Racz, Muntean and Stan 441) Toyota CSR Impact on Its Value While the Toyota Company may have been driven by the need to develop a new technology that will promote better environmental friendliness of the car models, such an excellent move has acted to increase the company’s profitability and reputation. Through its hybrid car models that cover at least six car models, which include Avalon Hybrid, Camry Hybrid, Prius, Prius V, Prius C, and the Prius Plug-I, the company’s hybrid line of cars is the most successful in the world (Ghosh and Chitra 82). It has positively influenced the company’s profitability and revenues. In 2013, the company accounted for 80% of all hybrid sales of cars in the global market. At the company’s level, the hybrid cars accounted for more than 14% of the total car sales at the company (Racz, Muntean and Stan 439). This figure is expected to rise to 30% by 2020. The impact of the hybrid cars on the Toyota Company in terms of its value has been significant. The achievement has placed the company as a leader in the automobile technology that focuses on fuel efficiency and environmental friendliness as per the EPA guidelines. The popularity of the car in both the domestic and international markets is a clear sign that customers around the world view the company’s cars as more environmentally friendly and fuel efficient as compared to other models that are available in the market. Generally, the company’s hybrid cars have allowed it to be viewed as highly dedicated to the development and implementation of more fuel-efficient cars that are also affordable and responsive to the needs of the customers, as well as the changing world of environmental enlightenment. Apart from the high reputation, the company has achieved high levels of profitability and production capacity, with more than 10 million cars being sold in 2012. This record is yet to be broken by any other company in the automobile industry. It is evident that Toyota’s hybrid cars have been instrumental in increasing the company’s value and competitiveness through their capacity to reduce carbon emissions into the environment. Indeed, it is clear that the company’s production of hybrid cars has not only increased its profit value but also positively affected its stakeholders, including customers, employees, investors, suppliers, and governments. In terms of customers, the common trend revolves around the fact that contemporary consumers are increasingly becoming environmentally conscious and are boycotting products and services produced or provided by companies with a pathetic environmental record. Toyota is likely to win the hearts and minds of such consumers because its hybrid vehicles present a cleaner alternative to traditional cars. The hybrid cars are known to consume less oil, resulting in minimal CO2 emissions. The company has the potential to attract more customers in the future due to embracing a green growth strategy, which handles its heightening capacity to produce hybrid cars that are economically and environmentally sustainable. The pioneering experiences emanating from the development and mass production of hybrid cars demonstrate that environmental sustainability efforts go hand in hand with profit-making and enhanced competitive advantage. It is worth mentioning that these customers form part of the community members who stand to benefit from improved health outcomes due to reduced emission of CO2 to the environment. The company stands to improve its bottom line through increased sales of environmentally friendly hybrid cars. Top-level or talented employees are known to be attracted to companies with a proven environmental sustainability record. In this respect, Toyota is bound to keep on attracting and recruiting an innovative and talented pool of employees. This is because of the company’s concern for the environment as demonstrated by the substantial investments made to mass produce hybrid vehicles for domestic and international consumption. A talented pool of employees not only adds to the company’s growth strategy but also ensures that the firm adopts new ways of doing business and creating value. A significant number of these employees want their employer to adopt and implement environmentally conscious practices such as is the case in Toyota. Employing top-level employees enhances the company’s value and bottom-line in terms of knowledge transfer, innovation, as well as reputation development. Toyota’s ownership of the Prius hybrid model is likely to attract talented employees due to its appeal to issues dealing with environmental sustainability and environmental consciousness. Companies exist to fulfil the interests of their shareholders, particularly in terms of profit making and competitiveness. As such, the production of Toyota’s hybrid cars has already served to fulfil this need if the higher number of cars sold locally and internationally is to be considered. Additionally, Toyota shareholders are carried in high esteem for leading efforts to develop the world’s first environmentally friendly car. The esteem has served to increase the company’s value and profit margins when compared to other automobile manufacturers. It is worth mentioning that Toyota’s shareholders have continued to commit more resources to CSR activities at the community level. The CSR activities include upgrading educational institutions, harnessing clean energy sources, sponsoring needy students, and building health systems. A significant amount of the funds that are committed to run these programmes are sourced from the sale and servicing of the hybrid cars. The shareholders also take pride in the realisation that the company, through its production of hybrid vehicles, has been at the forefront in minimising pollution-related diseases. In manufacturing the hybrid cars, Toyota has an undertaking to contract or subcontract suppliers who are committed to reducing their carbon footprint. Many vendors are known to contribute to environmental degradation through their supply chain and other logistical activities. However, Toyota has increased its corporate value by ensuring that it conducts business with environmentally conscious suppliers and subcontractors. A substantial proportion of the components that are used in the manufacturing of the hybrid cars, for example, are sourced from reputable and environmentally conscious firms in Japan, America, Europe, and other Asian countries. The stringent rules observed ensure that these suppliers do not harm the environment when preparing or transporting the components. Establishing close relationships with environmentally conscious suppliers plays to the advantage of Toyota in terms of image and reputation development, increased sales volumes, and active contribution to the reduction of the carbon footprint. Lastly, when it comes to governments, it is worth mentioning that most departments and regulatory agencies in global governments rate firms with a visible reputation for environmental responsibility more highly than others. Government agencies always like to do business with environmentally conscious companies. It can be argued that the hybrid cars manufactured by Toyota have increased its visibility in many countries and communities. Such visibility is critical to the creation of value and maintenance of competitive advantage. Governments are likely to spend less on treating diseases related to environmental degradation. Additionally, governments around the world are likely to react more compassionately to the company’s request for business permits and other regulatory requirements. The compassion is likely to be triggered by the company’s efforts to reduce CO2 emission through the manufacturing and distribution of hybrid cars. As such, the company stands to gain more value and competitive advantage through its engagement with hybrid vehicles as a primary recourse to its CSR activities. The community also stands to benefit in terms of reduced CO2 emission and improvement in the health and well-being of members. A good CSR does not just give value to the community, but also to its shareholders. There is no better way to explain this claim other than using the Toyota Company as a working illustration. With a market share of more than 67%, the Toyota’s hybrid cars account for approximately 14% of its revenues. This figure is expected to rise to 30% by 2020. The company sees a strong future in its hybrid cars based on their high efficiency, credibility, and the company’s superior image in the sector (Ghosh and Chitra 84). While this market is rapidly changing with new entrants, as well as the reducing popularity of the hybrid models due to the low oil prices that are prevailing in the market, the Toyota Company’s hybrid will continue to be popular to the extent of creating more value for the company in both the short-term and the long-term. The company’s investment and continued research on technology, research, and development has allowed it to be a pacesetter in the world, which is becoming increasingly environmentally conscious while calling for accountability of corporate entities as far as the impact of their activities on the environment are concerned. Overall, the company has done a commendable job that other organisations should emulate, especially in terms of balancing between profitability and benefiting the general society. Conclusion Corporate social responsibility activities allow an organisation to give back to the society by either providing products that benefit the organisation while at the same serving customer needs in a responsible and effective manner or providing an assistance that goes towards elevating community’s problems or challenges. In other words, the CSR allows an organisation to be a responsible member of a community by contributing positively to the betterment of the public where possible. However, while the CSR activities are good intended, the outcomes of such activities vary from one organisation to another and/or from one activity to another. As a global automobile company, the company operates in an environment where automobiles have been blamed for the increasing gas emissions that are causing global warming, which has been affecting the environment. As a responsible citizen, the company has invested heavily in the availing of hybrid cars to masses. These cars are highly fuel-efficient. They combine the use of gas and electricity, thus ensuring more fuel efficiency and environmental friendliness. Concisely, the company’s hybrid cars are an important example of a successful CSR activity, which has had a significant impact on the company’s reputation. The activity has increased the company’s value to become the world’s largest automobile maker. Works Cited Barnea, Amir, and Amir Rubin. "Corporate social responsibility as a conflict between shareholders." Journal of business ethics 97.1 (2010): 71-86. Print. Ghosh, Priyanka, and Charles Chitra. "Hybrid cars: the chauffeur of next-gen world's automobile market (with respect to four wheeler cars)." International Journal of Physical and Social Sciences 5.4 (2015): 80-100. Print. Hopkins, Michael. The planetary bargain: Corporate Social Responsibility Matters. New York, NY: Routledge, 2012. Print. Lindgreen, Adam, and Valerie Swaen. "Corporate social responsibility."International Journal of Management Reviews 12.1 (2010): 1-7. Print. Megumi, Suto, and Hitoshi Takehara. The impact of Corporate Social Performance on Financial Performance; Evidence from Japan, 2013. PDF file.24 June 2015. . Racz, Andrea, Ionuţ Muntean, and Sergiu-Dan Stan. "A Look into Electric/Hybrid Cars from an Ecological Perspective." Procedia Technology 19 (2015): 438-443. Print. Toyota Hybrid’s Environmental Impact. n.d. PDF file. Web. 13 Jul. 2015. . Vogel, David. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington DC: Brookings Institution Press, 2005. Print. Read More