The corporate social responsibility of Formosa Plastic Corporation - Essay Example

In pursuit of environmental protection, Formosa Plastics Corporation adheres to initiatives that are targeted towards improving the environment. For example, the corporation in the areas of energy and water conservation invested about US $ 0.57 billion from 1999 to 2012, which saw completion of more than 6,356 improvement projects. This enabled the corporation to save 287,000 tons in terms of daily water usage, and decreased carbon-dioxide emissions by about 8.064 million tons yearly. The corporation intends to implement another 772 improvement projects in the future. This will save about another 13,000 tons of projected daily water usage and lower carbon-dioxide emissions yearly emissions by another 1.371 tons. The corporation prevents and proactively controls pollution in all stages of its manufacturing processes. It has established comprehensive garbage classifications and kitchen waste recycling initiative. The corporation has established Formosa Environmental Technology initiative that recycles kitchen waste into organic fertilizers for growing organic vegetables and fruits (Formosa Plastics Corporation 2010). Society-Focused Initiatives The corporation’s management understands the fact that there is need to give back to the society. The corporation understands that in the region they operate there is lack of medical and industrial talent, which has resulted to substandard healthcare resources. The management decided to establish non-profit institutions like the Chang Gung Memorial Hospital, Ming Chi University, the Chang Gung University of Science and Technology, and Ming Chi University of Technology, which train talents in different fields. This has promoted education in the region, thus promoting the lives of many in the society. Furthermore, Chang Gung Memorial Hospital has enhanced operating policies and standards based on people-oriented services. These health services targets the elderly people in the society. The corporation has spared no concern in terms of social welfare and charity over several decades. It donated about US $ 1.62 billion to date. This amount was used for the construction of schools and campuses that was destroyed by 9/21 earthquake and Typhoon Morakot, the promotion of service quality on intervention institutions, and helping inmates who were suffering from AIDS by rehabilitation projects. In addition, in case of any pollution, especially that of chemicals, the corporation intervenes that assisting the community financially and emotionally (Formosa Plastics Corporation 2010). Positive motivations for being more responsible and integrating CSR The corporations CSR has been motivated by the commitment to promote sustainable environment in the area they operation. The corporation is motivated by the need to meet the needs of all the stakeholders within the company that include suppliers, customers, stockholders, contractors and employees. In order to determine the effectiveness of every department, the corporation places great significance on CSR strategies. Therefore, through analyzing the difference between actual and objective performance, the corporation is motivated to identify issues that causes the gap, organize improvement strategies as well as attain the goals of cost control as well as financial performance. The main emphasis depends on the cost analysis, where each aspect is deeply analyzed and cost objectives ascertained (Formosa Plastics Corporation 2010). CSR strategies in the corporation, emphasis the need to engender communication pathways between different departments and divisions to promote that all the processes are harmonized. Moreover, for several years through the CSR policies, managers at Formosa Plastics Corporation used a management control system with an aspect that was somewhat exceptional for a large corporation – all workers are evaluated individually. In making their judgments, evaluators looked at objective performance measures; however, instinctively made many adjustments for factors they deemed to be beyond the employee’s control. One consequence of this system was that bottom-line profit is not even considered in the evaluations of some profit center managers: These managers are assessed only in terms of the controllable factors driving profit, like meeting production schedules, efficiency, cost control, and quality. The company through effective management has continued to make profits thus promoting its financial status as well as customer base. This is underscored in the main CSR strategies that aim at making managers and employees accountable and effective while undertaking their duties (Guo & Teng 2012). Positive benefits of the CSR strategy CSR strategy for Formosa Plastics Corporation has ensured that the company image has been maintained in the current volatile market that demands for effective implementation of CSR strategies. CSR plays a leading role for the company as they undertake their operations in the community. According to the management, CSR shouldered by the business to survive, is required by the community. Nonetheless, it also should have a positive contribution to the community. Thus, whilst pursuing profits and competitiveness in the market, the corporation has maintained high ethical standards, taking, as a starting point, actions that will eventually benefit the community. The management recognizes that they should serve as role models; however, also have to develop a good organization as well as wholesome system, which encourage workers to seek constant improvement. Thus, apart from seeking good performance in terms of business operations, the corporation further believes that the corporate social responsibility as well as competitiveness is complementary; therefore, they have continually strived for the materialization of social responsibility, carbon reduction energy conservation, and the reducing of greenhouse gas emissions. In terms of promotion of energy conservation as well as carbon reduction projects, we are in sync with international energy conservation and carbon reduction measures. In resonance with policies by the government, it have launched eight improvement projects categories comprising production energy conservation, environmental accounting, lighting energy conservation, green products, green purchasing, resource recycling, office environmental protection, and green architecture, hoping to contribute corporation’s strategies towards environmental development in the countries the corporation operates (Guo & Teng 2012). For instance, after half a century of devoted management and continuous refinement, the corporation has garnered significant technology as well as management capacities in different markets and has attained a decisive position in the international markets. Through the accumulation of experience, energy and water conservation improvement measures, the most modern and most eco-friendly (low pollution) production technology is introduced, whilst different work safety inspection measures, like carbon reduction and waste reduction are implemented to improve work safety management as well as environmental protection performance, finally attaining the ideal objective of Zero Disaster, Zero Pollution and Zero Work Safety Accidents (Formosa Plastics Corporation 2010). Arguably, the CSR strategies have increased the corporation’s image in the international market. The corporation has engendered different strategies that have enabled it to remain the leader in the plastic industry. This has enabled the company to attract several customers as well as suppliers who esteems the corporation’s operations. In addition, this has allowed the corporation to increase its customer base increasing its profitability. The CSR strategies allow the company to become competitive in the plastic market. The corporation faces fierce competition, but through the CSR strategies it has remained the leader in the industry. Many customers always like those corporations that promote CSR practices in their business environment (Formosa Plastics Corporation 2010). Formosa Plastics Corporation through its CSR practices underscores the fact that in the company there should be an element of accountability and transparency. In particular, the corporation through effective CSR policies on CSR has promoted the aspect of financial control. Within Formosa Plastics Corporation, divisions are measured based on a return-on-investment (ROI). The profit element of the ROI measure (the numerator) comprised allocations of all corporate costs including interest; however, profit is measured before taxes. The investment element of the ROI measure (the denominator) comprised only the investments, which could be traced to the divisions (e.g., equipment, buildings, inventory, and working capital). No corporate assets are allotted to the divisions, plants and product groups were considered as profit centers; distinctive production processes as well as group of machines are cost centers; and non-production-oriented units (for instance sales, technology, and management) are expense centers. This is underlined under the CSR Policies of accountability, which has transformed the financial aspect of the corporation (Formosa Plastics Corporation 2010). The major element of corporation’s financial control system entails a detailed cost accounting as well as reporting system. Standard costs are set for each element of manufacturing (that is labor, raw material, packing, steam, and waste). The manufacturing processes tended to be stable, so the corporation has wide-ranging historical records, and the cost standards are greatly refined and precise. Indirect costs are allocated to entities as well as products using a variety of allocation bases (e.g., number of people and production quantity). Where required, transfer prices for products sold internally are set either at market price less costs not incurred on internal transfers (for instance, selling costs, duties), or at full standard cost (less costs not incurred) plus a markup (Formosa Plastics Corporation 2011). In addition, the cost standards are revised on time when conditions demands and they were used to inspire continuous improvement in the community through the CSR policies engendered by the corporation. For instance, if an investment project aimed at improving productivity is scheduled to be finished in July, the cost standards were changed in July. If the project was delayed or development is not as anticipated, the problem would show on an irregularities (variance) report. The firm produces an extensive set of performance reports on a monthly basis. These reports enable management to attack problems speedily. Positive problems of integrating CSR in the business strategy However, the road for the corporation has not been smooth because in some cases it has found itself in litigations for violating some regulations and rules. These regulations and rules deals with environment and the corporation have breached therefore attracting penalties. Formosa Plastics Corporation has been fined for alleged safety and health hazards at its dispersion PVC resin plant in Delaware City in US. For instance, on September 2012, the Occupational Safety and Health Administration (OSHA) pronounced $148,700 in proposed penalties for 16 supposed violations at the site that employs around 100 workers. Two of the violations are repeat offenses, which too were cited in a separate inquiry in early 2010. These replicate violations entail supposed failure to perform process equipment inspections as well as tests; failure to inspect critical valves as well as failure to make sure that PVC dust did not build up on surfaces and on the floor of a bagging region. The other violations comprise supposed electrical hazards, incomplete emergency shutdown procedures, lack of machine guarding, and among other claims, all of which are grouped as grave violations by OSHA. Furthermore, in late 2009, Formosa paid a civil penalty of approximately $3 million to resolve numerous supposed environmental violations at its plastics plants in Texas, Point Comfort, and Baton Rouge, La. At that time, the corporation as well agreed to spend over $10 million on pollution controls at those sites (Formosa Plastics Corporation 2010). Therefore, these challenges have given the company the need zeal to engender several CSR practices that will promote the image of the company and taking care of the welfare of the community they operate. The challenges have assisted the company towards turning them into opportunities. This means that the CSR problems experience by the company has thought the company a lesson to learn from the problems, thus transforming their business practices positively. For instance, through the previous litigations, the company has made sure that there no further litigations that will affect the company. Based on the report of the company, the number of litigations has declined during the last five years. This indicates that the company has been positively impacted by the problems resulting from violating the laid down rules in the plastic industry (Formosa Plastics Corporation 2010). 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