Strengthening of Corporate Governance of the Company - Essay Example

? Evaluate one organisation’s approach to sustainability measurement Contents Contents 2 Tesco: Overview 3 Environmental and social risks 4 Evaluation of sustainability measurement 5 Strengths and limitations of sustainability measurement 7 References 9 Tesco: Overview Tesco is a multinational grocery and retail merchandiser that runs a chain of departmental stores. The company is headquartered in UK and caters to the customers in the grocery as well as in the retail market. The company is the third largest in the world in terms of the revenues earned and the second largest in terms of profits earned by the company. Tesco runs its grocery stores and retail merchandizing outlets in several countries across the world in the Asia, Europe and North America. The company is the leader in the grocery markets in UK and has also established itself as the leading grocery and retail merchandiser across several parts of the world. Tesco is the fifteenth largest company among all the companies in the world and is listed in the London stock Exchange. The company is also included in the list of FTSE 100 companies in the UK market. Tesco runs its operations through the supermarket chains, departmental stores, cash and carry outlets and warehouses. Apart from the grocery items, Tesco also offers its customers with the electronic products, computer software, books, furniture, music CDs and DVDs, other items of merchandise, etc. The increase in the supermarket chain and departmental stores with the increase in retail merchandizing activities of Tesco have seen the number of stores of the company grow from 500 stores in 1990 to more than 2500 stores in the next two decades. The company employs around 5.5 lakhs employees in the areas of operation and customer service. The company pays due attention to the sustainability of the leadership position that it has attained over the years. The actions of sustainability measurement have helped the company to retain its position and brand image in the market (Tesco, 2013, p.1). This has paved the path of sustainable growth of Tesco as a multinational company in the world. Environmental and social risks The direct and indirect environmental and social risks for Tesco have been explained as follows. In order to identify and analyse the environmental and social risk exposures of the company, the industry risk as well as the company specific risk should be taken into account. The retail market and industry has undergone a shift to the low demand of the consumers due to the macro-economic fluctuations and events of recession. Tesco faces the risk exposure related to the compliance and regulations for the retail market chains on activities that would lead to environmental pollution, disposal of wastes, etc. The social risks are also involved in the operations of Tesco due to probable negative impacts on the environment and society due to the disposal of wastes in the operations of the company. The social risk forms a major part of the risk exposures in the operations of Tesco as the perception of the society to the operation of the company indirectly affects the sale and revenue earnings of Tesco. The operations of Tesco lead to the perception of brand image of the company. Any impression of loss of faith among the members of the society and the consumers has significant impact in the international operations of the company (Epstein, 2008, p.46). The discrepancies in the operations of the company not only expose the company to environmental and social risk but also increase the risk of value chain system in the company. The financial risk exposures of the company originate from the volatility of the stocks in the retail industry. The volatility of the index leads to the fluctuation of stock prices of Tesco. This would expose the company to risk of degradation of the valuation of the company. Financial risks related to the company may arise due to the discrepancy in financial reporting of the company. The deviation from the guideline in the financial reporting procedure presents incorrect information on the company to the shareholders, consumers and the society (Bell and Morse, 2013, p.94). This increases the possibility of mis-investment by the shareholders which exposes the company to long term risk of reduction of company valuation. Apart from this, the company faces the risk due to the cut-throat competition in the retail market. The uncertainties due to the rivalry in the industry, bargaining powers of the suppliers and the consumers are risk exposures of Tesco. The threat of new entrants and substitute products in the markets are also included in the areas of risk for Tesco. Evaluation of sustainability measurement Tesco having reached a leadership position in the retail industry over the years and catering to consumers with retail grocery and merchandizing products focuses on sustainability measurement and reports the finds of such measurements in the sustainability reports in order to continue its march as an established player in the retail market. For this the company resorts to the internal measurements of the key objectives set by the company in its field of operations. Tesco has the vision of establishing itself as the strategic partner of their customers in the purchase of retail merchandize items and also to enhanced customer service in the course of buying and selling of retail merchandized goods. The company pays due attention to the customers and employee who form the core of their business (Hamilton, Hamilton and Atkinson, 2006, p.56). Tesco has the mission to establish itself as the most valued merchandiser in the retail industry with high level of loyalty from the customers and the employees. In order to monitor whether the objectives of Tesco is fulfilled during the course of operations, it internally measures the financial and non-financial performance in the context of sustainability of the business objectives for future growth. Tesco identifies corporate social responsibility and corporate governance as key drivers for meeting the objectives of the company as per their mission, vision and goal and being able to carry out a sustainable performance in the long run (Hak, Moldan and Dahl, 2007, p.46). Therefore, Tesco measures the brand image of the company through the activities of corporate social responsibility. The organization recognises its boundaries that the people and the society are the ultimate sources of revenue earnings and places great emphasis in addressing the concerns of the society and the consumers, investors and the shareholders. The stakeholders have been identified in order to ensure that the internal measurement of the impacts of the company operations and the actions taken serve the purpose of the management (Schaltegger, Bennett and Burritt, 2006, p.39). The identified stakeholders are the people of the communities, the employees and the market investors. The indicators used for measuring sustainable development are the growth of market capitalization, stock price fluctuations of the company, etc. The activities of corporate social responsibility include the filters included in the operational procedures to remove the disposal of solid and carbon waste products (Cuthbertson, 2011, p.13). The society also gets the impression that Tesco as a market leader has long term plans to carry out operations in the market. The contributions to the society lead to increase of loyalty of the consumers. The employees also become loyal to the operations of the company as they find a dedicated operational system that not only drives the sales for revenue earnings but also tales care of the people. In order to protect the interests of the shareholders as a part of sustainable measurement, the company also looks at strengthening the corporate governance of the system. The employees, suppliers and all the stakeholders of the company are enforced to adopt fair practices according to the policies of fair practice of the organization (Atkinson, 1997, p.27). The management of Tesco pays due diligence to the facts that the financial statements and reports are prepared according to the standard accounting procedures. It is ensured that the financial reporting and auditors’ reports resemble the actual values of the key financial parameters and the actual valuation of the company. The fair reporting practices are aimed at helping the investors and shareholders to undertake correct financial decisions for investment in the company (Geok?ceku?s, Teurker and LaMoreaux, 2011, p.58). This helps the company to ensure sustainable development by establishing faith among the investors which is important for future growth of Tesco. Strengths and limitations of sustainability measurement The activities for sustainable measurement by Tesco are very effective in addressing the major issues of risk identified for the company and the industry. The activities of corporate social responsibility and strengthening of corporate governance of the company has helped the company to retain its leadership position in world markets, especially the UK markets. The focus of the company on the environmental and social issues apart from driving its sales growth has helped the company to sustain its sales growth in the long run (Aronsson, Johansson and Lofgren, 1997, p.72). The reduction of carbon and solid wastes and the recycling of the wastes lead to the impression among the consumers that the company has a long term growth plan and has concerns about the people who are keys to their business. The additional of brand value is important for Tesco to achieve sustainable growth. The financial risk of market volatility and uncertain in the decline of company valuation have also been minimized by adopting fair practices of accounting, true financial disclosures and strict corporate governance by the management (Bennett, James and Klinkers, 1999, p.45). The strengthening of corporate governance has been effective in protecting the interests of the investors and their own people. However, there are certain limitations of sustainability measurement. The sustainability measurement activities are viewed as expenses by some segment of the stakeholders who perceive that these activities for sustainable development do not add economic value in the short run. The benefits of sustainable measurement over a period of time could not be realized by the stakeholders who recognize such expenditures as economic loss (Bell and Morse, 2008, p.38). Hence, it is likely that Tesco would face opposition from such segment of stakeholders towards sustainable measurement. References Tesco. 2013. Vision and Strategy. [Online]. Available at: http://www.tescoplc.com/index.asp?pageid=12. [Accessed on 19 August, 2013]. Epstein, M. J. 2008. Making Sustainability Work: Best Practices in Managing and Measuring Corporate Social, Environmental, and Economic Impacts. UK: Berrett-Koehler Publishers. Bell, S. and Morse, S. 2013. Measuring Sustainability: Learning From Doing. USA: Routledge. Hamilton, K., Hamilton, K. and Atkinson, G. 2006. Wealth, Welfare and Sustainability: Advances in Measuring Sustainable Development. UK: Edward Elgar Publishing. Hak, T., Moldan, B. and Dahl, A. L. 2007. Sustainability Indicators: A Scientific Assessment. USA: Island Press. Schaltegger, S., Bennett, M. and Burritt, R. 2006. Sustainability Accounting and Reporting. Germany: Springer. Aronsson, T., Johansson, P. and Lofgren, K. 1997. Welfare measurement, sustainability and green national accounting: a growth theoretical approach. USA: Edward Elgar. Atkinson, G. 1997. Measuring sustainable development: macroeconomics and the environment. USA: Edward Elgar. Geok?ceku?s, H., Teurker, U. and LaMoreaux, J. W. 2011. Survival and Sustainability: Environmental concerns in the 21st Century. USA: Springer. Bell, S. and Morse, S. 2008. Sustainability Indicators: Measuring the Immeasurable?. UK: Earthscan. Bennett, M., James, P. and Klinkers, L. 1999. Sustainable Measures: Evaluation and Reporting of Environmental and Social Performance. UK: Greenleaf Publishing. Cuthbertson, R. 2011. Sustainable Supply Chain Management: Practical Ideas for Moving Towards Best Practice. Germany: Springer. Read More