The Management of Green and Ethical Issues - Essay Example

?The Management of Green and Ethical Issues Table of contents Benefits of going green Corporate reputation Financial benefits Competitive advantage leading to more loyal clientele and business Risk management Customer loyalty Employee morality and retention Section II The Fairmont way of handling environmental issues and reputation Applying the Fairmont way in environmental issues and image making Green strategies- A look into the hotel industry Applying green strategies Dealing with local suppliers Excess executive bonus and pay Unhealthy products, ingredients, and foods Involving suppliers in the ethical and environmental initiatives Applicability of the Philips and Apple methods in Mr. Taylor’s organisation Conclusion Section I Benefits of going green The Stern Report of 2006 points out that 70% of the climate change in the world is caused by CO2 emissions which mainly come from fossil fuel burning. According to the Review, in order to stabilise the situation, there is the need to bring this emission down by 80%. As a result of this CO2 emission, there is a rise in global temperature, and consequently, there is increased melting of polar ice and rising sea levels. These changes are followed by considerable variations in ecosystems. The Stern report also points out that it is necessary for the energy sector to cut down the use of fossil fuels by 60% to retain the atmospheric balance. So, in the energy sector, there is the threat of water pollution, air pollution, and depletion of fossil fuel that is non-replaceable (Stern Review final report, HM Treasury). So, evidently, it is high time for businesses to look for alternative energy sources. Some other important environmental issues caused by businesses are the huge production of waste, water pollution, air pollution, and the loss of land and biodiversity. Probably because of this understanding, more and more consumers are going green. It is probably this realisation that made many companies to think about environmentally sustainable ways of operation. In other words, many companies presently think it is important to have an impressive range of environment protection measures as a part of their corporate social responsibility. A study by Hurst (2004) identified that a considerable proportion of leadership companies presently identify the value of taking care of environmental issues and the value of assessing their own performance on a regular basis. Corporate reputation Evidently, the first benefit associated with going green is the improvement in a company’s corporate reputation. It is seen that large high profile companies are effectively utilising an attractive CSR that helps the company enjoy a considerably greater reputation that it cannot normally achieve. A perfect example for this is the beauty and cosmetics giant The Body Shop (Values Report, 2009). The company, from its very inception, stood firm on certain ethical and environmental principles. For example, it is against animal testing, artificial ingredients, environmental degradation, and forced labour. The company claims itself to be carbon-free, and it advocates fair trade and fair price, along with the concept of community trade which ensures that the company procures its ingredients from marginalised producers (ibid). If someone thinks that all these cost the company a lot as this would make the company’s products expensive, the exact opposite is true. The company’s surveys show that 89% of its customers value the company’s ethical activities highly (ibid). Financial benefits According to USA Today reports, many companies have realised how to make money or save money through environmentally sustainable practices. For example, the Sun Microsystems saved hundreds of millions of dollars through the introduction of telecommuting (Sun’s open work energy measurement project, 2009). However, the industry that is benefiting the most from the green revolution is the hotel business. For example, the Holiday Inn on King in Toronto saved nearly $ 14,852 in a year by introducing low-flow shower heads and faucet aerators (Graci, 2002). In the same way, the Comfort Inn Suites in Red Deer, Alberta launched a solar energy system. According to reports, this system is highly cost effective. So, it is rightly said that financial benefit is the main factor that attracts businesses towards environmentally sustainable methods. Competitive advantage leading to more loyal clientele and business It is accepted that green products are likely to give businesses a better image in the eyes of clients. For example, there are a considerable proportion of people who look for green products and services. The second point is that as the cost of non-renewable energy is on rise and is unlikely to recede, the ones who have moved to sustainable practices will find themselves in a better position to meet the increasing demands of their customers without a heavy burden on their coffers. In addition to all these benefits, there is a positive air of publicity associated with awards and recognitions. For example, the Fairmont has got many awards for their green practices. Some of them are Environmental Leadership Award 2008, Green Leadership Award 2008 and so on. Evidently, the awards and recognitions make the firms famous, and this, in turn, attracts more and more clientele. Thus, it becomes evident that having green practices and having it well-publicised give the companies a competitive advantage. Risk management Presently, people view a good corporate social responsibility stand as well-connected with reduced risk. When it comes to hotel and food industry, the risk management focuses around food, water, and fire damages to guest safety. So, evidently, the key issues that are to be addressed will be water pollution, air pollution, noise pollution, and such issues created by the supply chains too. Evidently, preventing these issues before happening is very necessary for the hotel businesses. As Graci and Dodds (2009) point out, having a good environment management policy is considered as an indication of good service quality by many. Here, it is good to see how Royal Philips Electronics which is the largest electronics company in Europe manage manages to have a well-defined corporate social responsibility and gets it implemented in its operations in 190 countries. In the study conducted by Hurst (2004), it is found that there are six specific features that keep Philip Electronics apart from other competitors. The first point is that Philips has a well-prepared code of business conduct that is available publicly. The second point is that there is a well-prepared and publicised conflict of interest that is made available throughout the company and its supply chains. Thirdly, there is the presence of an Ethics Officer and the whole company knows who the person is and what his role is. Whenever there is a fault, the company has a perfect whistle blowing system available. The next feature is that the company possesses a published CSR. Lastly, the company considers the CSR as a corporate principle that is to be achieved with the cooperation of all (ibid). Thus, it becomes evident that going green is a way to show that the company is ready to face any risk in the field, or, in other words, the company is unlikely to face any crisis. Customer loyalty Undoubtedly, the last two decades saw a considerable change in the attitude of consumers. A considerable proportion of the consumers have become well-aware about the environmental issues associated with business practices. So, evidently, the company that manages to address the environmental issues at least in its stated corporate social responsibility will attract these customers. In addition, though other factors like location and brand name make customers reach a particular company, once they come to know about the high ethical and environmental standards of the company, they are highly unlikely to leave the company in the future. This benefit is evident from the publicised policies of companies. For example, Philips has declared that it will reduce its CO2 emission by 25%; and in addition, there is the claim that the company will improve its energy efficiency by 25%. Another important claim is that the company will phase out the use of PVC, arsenic, phthalates, antimony, and beryllium (Environmental programs, Philips). Similar is the case of The Body Shop; there are a large number of claims. For example, the company’s Value Report 2009 claims that it will not have dealings with suppliers that do not try to meet The Body Shop Code of Conduct for Suppliers. In addition, the company claims that it will assess its suppliers every year for compliance with the code of conduct. Most important of all, the company claims to be carbon neutral. (Living our values). If someone is to believe that all these efforts go unnoticed, and will not respond in business terms, that belief is wrong; according to a survey, 89% of the company’s customers believe that what the company does is very important (ibid). Admittedly, the best way to ensure a company’s long term survival and a group of faithful clientele is to resort to environmental friendly practices. Employee morality and retention It is pointed out by scholars that taking environmental issues into consideration can boost the employee morale. Also, it is evident that a green example set by the company in its CSR will prompt the employees to follow the lead. In addition, this will make the employees feel proud to be a part of such an organisation as they find the values of the organisation similar to what they want to see done in the society. So, evidently, environmental programmes act as a way of motivating and retaining staff. Based on this understanding, many companies have started the move towards green. For example, companies like Nokia and The Body Shop, as a part of their environmental measures, make sure that employees volunteer a certain percentage of their time on such environmentally important activities. Thus, the activity of going green can be effectively used as a way to promote employee attachment towards the organisation. Section II Admittedly, Mr. Taylor’s company is facing a number of problems and consequent negative publicity. A look into the problems proves that the main issue with the company is the absence of a clear mission and vision for the management and a lack of ability to implement the same. So, it is beneficial to see how certain companies avoid such problems through proper strategies and proper implementation. The main issues identified at present are evident lack of green initiatives, poor staff performance and poor quality of products, improper record keeping by suppliers on human/animal rights, and the consequent negative publicity. The Fairmont way of handling environmental issues and reputation In order to handle the environmental issues, and to see how a positive image can be created, it is beneficial to look into the way Fairmont collaborates with various partners and organisations to address environmental issues. In fact, Fairmont has initiated a Green Partnership Programme that focuses on sustainable solutions for survival. In addition, along with the corporate Green Partnership, there is a Green Team for each property that looks into environmentally sustainable ways suitable for each property. In addition to all these, the company has started partnership with organisations like WWF. Also, the company has publicised its commitment to the Climate Savers program that works to reduce greenhouse gas emissions. In sync with the program, the company has developed a Carbon Management Programme (Fairmont Hotels& Resorts). In its green efforts, Fairmont includes its supply chains. As a part of this, the company has developed a Green Procurement Policy and Supplier Code of Conduct to ensure that its suppliers follow green policies in their operations. The company details the benefits it enjoys through these measures; meeting guest expectations in advance, cost reduction through innovation, promoting brand reputation, improving partnership relations, and streamlining operations (Fairmont Hotels& Resorts, Case Study). Applying the Fairmont way in environmental issues and image making Admittedly, presently the company does not have an attractive environmental policy. This makes the public image of the company bad which goes worse through the poor products and services the company gave due to lack of care from employees, management and suppliers. So, it is high time for the company to have a published corporate social responsibility that addresses ethical and environmental issues. In addition, it will be beneficial if the company manages to make partnerships with organisations to initiate various environmental protection programmes, and undoubtedly, the connection with such organisations will help the company improve its public image. In the second stage, the company can develop a Supplier Code of Conduct that ensures that the suppliers are made responsible to keep proper records on the ingredients they use, the animal/human rights, and what environmental protection measures they are adopting. In order to ensure that the suppliers comply with the code of conduct, there is the need to conduct regular audits and there should periodical audits by external agencies. Green strategies- A look into the hotel industry Another important issue is that there is a total absence of concern towards environment and green in the company. According to Graci and Kuehnel (n.d.), the main areas of environmental impact from food industry are energy, water, and waste. Some energy saving measures adopted by hotel industry in order to reduce energy consumption are the use of compact fluorescent lights, low-flow shower systems, installation of green roofs, and installation of solar heaters (ibid). For example, the Fairmont Royal York in Toronto spent nearly $ 25,000 in an energy conservation programme, and the company claims an annual saving of $ 200,000. Similarly, the Holiday Inn in North Vancouver saves about $ 16,000 in a year along with 28% reduction in energy consumption through the installation of an energy management system that automatically adjusts room temperature. For its energy and water conservation, supply chain management, and waste management, the company received 3 key rating from the Hotel Association of Canada. In a study conducted in the West Coast Grand Hotel, a number of steps were identified that could be used to save water. As stated in O’Neill et al (2002) they are providing water on request, replacing guest ice machines, reducing flushes during cleaning, educating kitchen staff, using better dishwashers, improving the cooling tower efficiency, and reducing heat exchanger loss. It is found that these strategies could save about 32 gallons of water per day, an impressive 25% of the total daily use (ibid). Solid waste in hotels ranges from paper, food, metals, plastics, aluminum, and glass. According to Alexander (2002), The Westin San Francisco Airport Hotel implemented various strategies to manage waste; they include purchasing recycled content products, environmental education to employees, and donating excess food to local food banks, recycling paper, aluminum, and plastics. In order to identify these opportunities the hotel can make use of external benchmarking organisations like IHEI and CERES Green Hotel Initiative (ibid). Applying green strategies The first step will be to have a Green Team that looks into the possibilities of going green. This team should set green parameters for each supply chain that are viable in the circumstances. Thereafter, the company should ensure extensive education and training to its employees and the employees of its supply chains. For this purpose, it can make use of an external agency like IHEI. Once the measures are adopted, the company should try to get certifications and recognitions that will improve the image of the company. Dealing with local suppliers Admittedly, ignoring local suppliers has its own negative impact on the public image of the company. There are many benefits if a company deals with local suppliers. First of all, this ensures that the company gets products at a low cost. This is because the huge amounts spent on transportation can be fully avoided if the local suppliers are utilised. The second benefit is that when there are local suppliers, the company’s image in the local area improves. Thirdly, there is the benefit that local suppliers will be able to provide seasonal items at a considerably lower cost, and the production of seasonal food will be significantly cheaper. Excess executive bonus and pay Yet another important problem faced by the company is the excessive money it pays to its staff. This payment is based on the misunderstanding that money is the only factor that can keep employees motivated and loyal. However, the fact is that money is only one among the man factors that promote staff welfare. What the company has to do is to set salaries at an industry average. In addition, if the company deems fit, it is good to introduce a performance based bonus program. Unhealthy products, ingredients, and foods Despite the use of foreign suppliers, and high executive salaries, the company has failed to ensure quality of products to customers. The production of unhealthy food proves that the company requires changes from top to bottom. For example, unhealthy food means the staffs do not care about the quality of products despite the great money they get. In addition, suppliers are providing poor quality ingredients. At this juncture, what the company has to do is to develop a proper code of conduct that details what performance the company expects from various stakeholders including suppliers and staff. In addition, being in a service intensive field, it is better for the company to adopt a zero tolerance policy towards non-compliance because in the food sector, it is highly unlikely for people to try a company a second time if they find fault with the service once. Involving suppliers in the ethical and environmental initiatives In fact, Philips is the winner of Supply Chain Management Award in the Netherlands. So, it seems beneficial to look into how the company manages its supply chain. In the case of Philips, the basic power that makes the company take rational decisions at every stage is the fact that it has a commitment to sustainability. This commitment includes sound environmental and ethical standards. As a part of this, the company has its own Supplier Chain Code of Conduct which combines the Philips General Business Principles and the Electronic Industry Citizenship Coalition Code of Conduct. In order to ensure that the suppliers properly understand the Philips’ and industry principles on sustainable business, and also to ensure that the suppliers comply with the directives, the company introduced Philips Supplier Sustainability Involvement Program that has five elements; setting out the requirements, building understanding and agreement, regularly observing the potential risk suppliers through audits using the EICC checklist, conducting supplier audits using external agencies, and helping the suppliers to resolve problem areas (Philips: Improving Health and Well-Being). In addition, the company directs its suppliers to declare their compliance with the Regulated Substances List. Now, each and every supplier of Philips has to make a total declaration of the materials and chemicals used for their each and every product. Almost similar is the strategies adopted by Apple. In the case of Apple, the company has developed a Supplier Code of Conduct that outlines the way the suppliers are supposed to perform. In order to ensure that the suppliers comply with the directives, there is regular rigorous auditing. In fact, the Apple Supplier Code of Conduct includes labour and human rights, health and safety, environment impact, ethics, and management commitment including documentation and records, training and communication, and corrective action process. In addition, in order to ensure supplier compliance with the code, the company conducts regular audit programmes, and the suppliers that are identified risky are given more attention. Once problems are identified, there are corrective actions to ensure that the erring suppliers are able to abide by the rules and regulations (Apple Supplier Responsibility, 2011). Applicability of the Philips and Apple methods in Mr. Taylor’s organisation The first issue identified in the case of Mr. Taylor’s company is the supplier’s inability or negligence in keeping human/animal rights records. Admittedly, the company has failed to ensure that there is a suppliers’ code of conduct that details everything the suppliers are supposed to do. Now, what the company has to do is to develop a new code of conduct that its all suppliers are supposed to abide by. This code of conduct takes into account everything from working conditions, wages, record keeping and quality of supply. Thereafter, the company should give the suppliers a time period within which they should take all the necessary measures to ensure strict adherence to the code. Once the deadline is reached, there should be rigorous auditing of all the supply chains, and for this purpose, it is beneficial to get the aid of an external agency. Conclusion In total, it becomes evident that there are a large number of benefits associated with going green in all business sectors though it is the most beneficial for food industry. Admittedly, the number of consumers who are green-conscious is on rise, and there is no possibility of the trend slowing down in future. So, it is highly necessary for companies to adopt sustainable ways of operation for profitability, stability, and public image. In the case of Mr. Taylor’s organization, it is highly necessary to develop a perfect corporate social responsibility and related code of conduct for its employees and suppliers. This should be accompanied by proper training and regular monitoring. 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