Multinational Companies and Their Impact on Environmental Sustainability - Assignment Example

1) Evaluate the progress of multinational companies in reducing their impact on environmental sustainability. Environmental stewardship is a stance that global organizations uphold takes to ensure the protection of the environment while it carries out its initiatives (Solomon & Stuart, 2000). Multinational companies are making headway in this area. For instance, Monsanto is making a billion-dollar investment for a biotech warehouse that has the capacity to sustain the globe’s rising populace. Simultaneously, they want to make such initiative environment-friendly. They project about 25 billion tons of the world’s topsoil being eroded annually. Irrigation is increasing soil salinity and tillable land is fast being depleted because of these developments. The outcomes are polluted air and water and fast deterioration of animal species. The scientific community has expressed concern over sustainability issues, considering the burgeoning 5.8 billion population of the world, which is projected to double within the next 30 years. Thus, serious measures on environmental sustainability need to be implemented now (Kilman, 1999). Monsanto has undertaken environmental sustainability programs that necessitate management to enhance three managerial competencies. The first thing that they did was to heighten their global awareness competency through the creation of offerings for global markets. The organization’s research team has dedicated their efforts to creating advanced products that have pragmatic, premium value to customers around the globe, but especially to those in developing countries. Moreover, the management of Monsanto is designating resources to be able to cope up with technological trends. For instance, in the agricultural arena, the organization’s researchers have tried to develop products including disease resistant fruits and vegetables. This effort has been supported by the government, giving them permission to sell genetically engineered seeds in numerous nations. However, there still is some opposition to the move. Lastly, Monsanto’s management has been engaged in the development of competitive, strategic thrusts to compete head-on with global competition (Kilman, 1999). The company is also out to respond to the issues put forth by environmental groups including Greenpeace, the Sierra Club, and the Union of Concerned Scientists. They have posed the question, for instance, of whether designer crops can contribute to addressing the pollution problem. Moreover, they have also scrutinized the production and utilization of herbicides and similar synthetic products. The Audubon Society has exerted more effort at wildlife protection, being engaged in the active monitoring of corporate practices that have an effect on both animal and plant species. In fact, it is the first company to put forth legal memoranda that necessitate the reduction of phosphate from water utilized for sugar refinement. The National Resources Defense Council has changed its initial stance by being more understanding of the trade-offs that are necessary for economic and environmental reasons. The company has also started to form collaborative partnerships. Nevertheless, there are certain environmental groups such as Wise Use that lobby for stringent land use and waste disposal laws and regulations (Kilman, 1999). Monsanto’s revived enthusiasm in environmentalism does not come without novel business challenges. With the passage of the U.S. Clean Air Act of 1990 and NAFTA, organizations faced more than a choice-they faced increasingly stringent requisites. Nonetheless, for some time now, companies such as Shell Oil Company, have advocated enhanced environmental planning and action to address public clamor for greater environmental concern (Kilman, 1999). The management of numerous multinational organizations has integrated environmental programs into their strategic thrusts. Thus, their plans are distinctively more long-term and with less concern on making quick profits (Berman, Wicks, Kotha, & Jones, 1999). The following are a few of the actions that organizations should take in heeding the call for greater environmental sustainability: Avoid coming into conflict with state and federal pollution control agencies. W. R. Grace faced a confrontation on the issue of antipollution requirements and presently engaged in costly restitution for asbestos-related problems and tedious asbestos disposal. Browning-Ferris, Waste Management, and Louisiana-Pacific have gone over board on domestic landfill requirements. In the future, when they bid for city, township, and county refuse collection and disposal contracts, their service plans will be surely be scrutinized (Hoffman, 1999). Compensate for environmentally risky endeavors. Based on the World Bank, two-thirds of the countries that export tropical forest products are facing shortage of trees. Moreover, in Central America, the forests have been cleared for cattle ranches. Haiti is almost treeless and once lush EI Salvador is a semidesert. Temple-Inland, a producer of corrugated containers, operates mills in both North and South America. Because trees must be cut to make paper and many wildlife species can be endangered because of cutting, the company cuts trees selectively. All cut trees are replaced with seedlings; reforestation takes about 15 years. In a recent move, the organization planted 30 million seedlings (Hoffman, 1999). Comply early with government regulations. Because compliance costs increase over time, organizations that act early often have lower costs. Early compliance may also increase their market share, profits, and competitive advantage. In 1997, Toyota unveiled its energy-efficient car, the Prius. It has both an internal combustion engine and an electric motor, which turn on and off independently to provide peak efficiency. Because the Prius gets as much as 66 miles per gallon, owners can save money while theyre doing their I part to save the environment and comply with U.S. government clean air standards (http://www.toyota.com). Cut back on environmentally unsafe operations. In the United States people in the Northeast claim that the sulfur dioxide emitted from coal-fired power plants located primarily in the Midwest are responsible for the acid rain that is killing lakes and trees in the Northeast. Promote New Manufacturing Technologies. In light of the problems with the earths ozone layer, Electrolux found that profits from its solar-powered lawn mowers, chain saws lubricated with vegetable oil, and water-conserving washing machines were 3.8 percent higher than profits from the companys conventional products. Similarly, Dixon Ticonderoga, maker of Crayons, introduced a crayon made from soybeans. It is an option to crayons culled from paraffin wax, which is a by-product of oil refining, and provides the crayons a brighter and richer color (Hoffman, 1999). Recycle wastes. More than 200 billion cans, bottles, plastic cartons, and paper cups are thrown away each year in developed countries. Many towns and cities have set up recycling programs to reduce the amount of waste to be disposed of and land required for disposal sites. Private companies also are involved in recycling efforts. Sonoco Products Company, one of the worlds largest packaging companies, takes its used boxes back from customers so that they dont have to worry about disposing of them. Sonoco benefits because the company uses recycled packaging for more than two-thirds of its raw materials. Other firms with active recycling programs are Safety Kleen (solvents and motor oil), Wellman (plastics), Jefferson Smurfit (paper), and Nucor (steel). Polyfoam Packers, a Styrofoam manufacturer, has initiated a recycling process that reuses Styrofoam beads (Hoffman, 1999). Management action plans. Managers can take the following specific actions to address to environmental sustainability concerns . • Give a senior-level person well-defined environmental responsibilities. This approach makes environmental concerns a strategic issue . • Measure everything: waste, energy use, travel in personal vehicles, and the like. Set measurable goals and target dates for environmental improvements. Monitor progress (Hoffman, 1999). 2) What is the contribution of the ISO14001 system to corporate sustainability? According to Segersen and Miceli (1998), global organizations have been involved in the implementation of environmental management systems. They have decided to do so to guarantee the sustainability of their efforts in relation to the environment. By convention, the implementation of such a system is expected to transcend simple compliance. This suggests that the environmental policies at the organizational level are stricter than government mandated regulations. The prospective expenses involved in taking on an environmental management system encompass special training, the reengineering of manufacturing processes, changing the way decisions are made across the process, investing in technology, consulting fees and certification-related expenses (Segersen & Miceli, 1998). The projected advantages that may be yielded from these systems include market-based profits and decreased regulatory costs. Specifically, the adoption of an environmental management system may allow the determination of venues for cost reduction. The outcomes are increased sales and promotion among a keen green consumer base. The decrease in regulatory expenses may be accounted for by the delay of regulation and the decrease in regulatory pressure (Segersen & Miceli, 1998). The International Standards Organization’s Environmental Management System standards have instituted ISO 14000 in 1996. It has been acknowledged that organizations need to have ISO 14000 certification to be able to tap particular markets. This has compelled increased global harmonization (Krut & Gleckman, 1998). They assert that this drive for high environmental standards do have some repercussions. One thing that is noteworthy is the exclusion of Third World countries from the process of drafting these standards. Moreover, the utilization of the ISO 14000 environmental management standards may cause companies to go beyond compliance with regulatory standards and raise the bar to more stringent environmental practices (Krut & Gleckman, 1998). There are concrete outcomes which indicate the contrary. Apart from compliance with domestic environmental regulations, ISO 14001 requires organizations to be recertified. In doing so, these companies are given the responsibility of practicing specific, self-imposed environmental standards or metrics. This is a process which has been found to be difficult by most organizations. Moreover, there is more attention given by these circles to the qualifications of the firms that are tasked to undertake audits for the certification process (Sonnenfeld, 2000). Companies implement these standards to guarantee compliance to environmental sustainability measures and to reduce destructive effects on the environment. The specification standards put forth the requisites for ISO 14000 certification. On the other hand, guidance standards provide the overview and directive for its application. ISO 14000 is the exclusive specification standard in this series; on the other hand, guidance standards encompass a wide array of topics, including the appraisal of environmental performance, audit, labeling and analysis of life cycles (Harrington & Knight, 1999; ISO, 2000; Welch & Schreurs, in press). As a global benchmark, the ISO 14001 has five primary components, namely, the policy for the environment, the plan, its application, progress tracking, and appraisal (Cascio, 1996; Harrington & Knight, 1999; Krut & Gleckman, 1998). These components have been drafted to interact dynamically within an environment enhancement cycle. A firm’s policy for the environment determines the groundwork for the development of environmental goals. Next is the environmental plan which determines the initiatives and related products and services that may have a significant effect on the environment. The implementation plan specifies the “how” of undertaking the plan. It is a requisite of the system to track the progress of initiatives that have crucial effects on the environment and to put up the necessary mechanisms that will address noncompliance. Lastly, the system necessitates that the management of the organization reassess the system from time to time to verify its effectiveness and continued importance. Once a firm is able to meet these requisites, it may already request for a certification by any duly acknowledged certifying unit that has a nationwide scope. Apparently, the certification process is prospectively complicated and is initially expensive. This is why it is a grave matter taken on by organizations. Nonetheless, the adoption rates of the system at the international level, has tended to increase (Lamprecht, 1997; Prakash, 1999; Zharen, 1995). The Adoption of ISO 14001 across Countries In Japan, ISO 14001 adoption has outperformed the pace found in other nations (Prakash, 1999). Statistics show that in April of 2000, the total number of certified companies in the country was 3548. In second spot within the same period is Germany, with 1950. In third and fourth places were Sweden and the UK, with more than 1000 each. US takes on fifth spot at 750 (Prakash, 1999). Political and economic theory has determined three general justifications for the high rate of adoption, citing regulatory benefits, competitive edge, and corporate social responsibility. On yielding regulatory benefits, the adoption of the system projects that such a voluntary move lessens the pressure from various entities concerned with environmental issues. Organizations may adopt the system voluntarily as a means of avoiding future regulation. Organizations that are under great regulatory strain are then the strongest prospects for voluntary adoption (Lyon & Maxwell, 1999). Organizations may also be compelled to adopt ISO 14001 standards for economic reasons, including decreased compliance costs, enhanced stakeholder trust, and addressing the demands of the market. For instance, the effective application of ISO 14001 may assist an organization to address several regulatory requisites concurrently, thus decreasing the regulatory costs for the enterprise (Fredericks & McCallum, 1995). One other reason for the voluntary adoption of ISO 14001 is to gain rapport with stakeholders. They may show greater favor for organizations that are known to have environmentally friendly practices (Baron, 1996). They may also anticipate making profit from peculiar green markets (Khanna & Damon, 1999), or may consider such adoption a strategic move (Williams et al, 1993). Some authors assert that this voluntary adoption may be a sign of rising consumer clamor for green products and organizations (Arora & Cason, 1996; Williams et al, 1993). Moreover, organizations are gradually acknowledging the monetary advantages that may be garnered from enhancement in the utilization of energy and in addressing inefficiencies – these are determined during the certification (Cramer, 1998). Industries and Sectors Adopting ISO 14001 The initiatives and management of the oil and gas industry have been especially critical to the environment. For instance, the UK oil and gas industry, similar to oil and gas companies, have now become a strongly regulated segment. It deserves the public attention it now receives to the extent that the UK government has been involved in promoting the adoption of such systems as ISO 14001. The application of such standards to the oil and gas companies have been investigated through structured interviews with their management. An analysis of the triggers, obstacles, and advantages that have been yielded from an adoption of the system have been studied (Strachan, Sinclair,  & Lal, 2003). Almost 50% of all Swedish domestic authorities utilize environmental management systems (EMSs), proof to the headway of the system in the public segment. An investigation has been undertaken in September 2000, yielding data from 289 local Swedish public agencies, and garnering an 81% response percentage. The intent of the exercise has been to comprehend the expanse of the ISO 14001 system in the public sector. The survey has mainly demonstrated that technical firms have been the first to take in the system, and have commonly used third parties for validation. The system is the most widely used standard overall; however, certification is not a compulsory goal among domestic Swedish authorities (Emilsson & Hjelm, 2002). The application of ISO 14001 represents a milestone in the Japanese private sector. In fact, an investigation has been done to comprehend the determinants of voluntary adoption of the system by organizations from the private sector within the country. A framework has been drafted anchored on regulatory guidelines, competitiveness, and corporate social responsibility based on the results of the 1999 survey results. Further analysis of the data show that there are various factors that affect voluntary adoption of the system, depending on the industry and the phase of certification. While the outcomes do not point out a causal relationship between implementation of the system and greening initiatives, they do suggest that there are at least two distinct phases on adoption that transpire in Japan, and these are related to environmental activity (Welch, Mori, & Aoyagi-Usui 2002). References Arora, S. & Cason, T. (1996). Why do firms volunteer to exceed environmental regulations: Understanding participation in the EPA’s 33/50 program. Land Economics, 72, 413-432. Baron, D. (1996). Business and its environment. Upper Saddle River, NJ: Prentice Hall. Berman, A. C., Wicks, S., Kotha, M. & Jones, T. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42, 1999, pp. 488--506. Cascio, J. (ed.) (1996). The ISO 1400 handbook. Milwaukee, WI: ASQ Quality. Cramer, J. (1998). 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