Sustainable Business and Ethics - Thesis Example

Sustainable Business & Ethics of the of the Vision and mission ments The comprehensive and general leadershipmission, vision, value framework and the relevant leadership elements of sustainability and Corporate Social Responsibility (CSR) can be designed for the international business plan as developed for Adidas. The vision statement of the company includes the aim of becoming the market leader in the sporting goods industry through the offering of a wide product portfolio in the sports goods and sports lifestyle segment. The mission statement of the company would be directed towards providing a platform for attaining the short term and long term business objectives. The mission statement of Adidas Group is to become the global leader in the arena of sporting goods which encompasses brands that are developed on the passion for sporting lifestyle and sports as an important consumer oriented aspect. The mission statement of Adidas suggests that the company focuses on being a leader in design and innovation of sporting products based in the changing needs and demands of the customer groups. Additionally, this mission statement also suggests that Adidas is a company driven by passion and innovation which it aims to incorporate through every part of its value chain and business functionalities. The mission and vision statements formulated for the Adidas business plan are designed on the basis of the primary objective of these statements to address the organizational components, organizational value chain and the organization as a single performing unit. The sustainability initiatives of the company encompasses different innovative strategies and initiatives like investing in suitable Corporate Social Responsibility ( CSR) initiatives, focusing on maintaining legal and ethical compliance and ensuring the adherence to the international and local regulations and policies of operating in the sports good industry. Becoming a sustainable company has remained one of the primary objectives of Adidas. For achieving a desired level of sustainability in its business practices and functions, Adidas has dealt with varying internal and external challenges. There are five key challenges that have to be faced by the company in its current initiative of tapping in the sports industry of the United States of America. These include being competitive, being a preferred employer, being a responsible multinational company, show adequate amount of environmental responsibility and also ensure the maintenance of sufficient levels of social responsibility in the management and functions of the business. The value framework for the chosen business is based on the key strategy of fair play in all areas and units of the business. The value framework in the company is driven by key sustainability initiatives, Corporate Social Responsibility (CSR) activities, product innovation and performance management, the most significant goal of Adidas is to emerge as the number 1 sports brand in the globe. This can be achieved through the use of contemporary strategies and effective management of the company. Adidas ensures that it offers a wide range of product portfolio to the existing and potential customer groups so that the aspect of customer need is met with in the most value reaping manner. Some of the performance benefits developed by Adidas as a part of its value framework are performing a faster, natural, smarter, cooler and stronger manner so as to remain in a highly competitive position in its respective markets of operation. 2. Comprehensive Organizational system The development of a comprehensive yet general organizational system and design in a company is a manmade for implementing suitable sustainability initiatives like stakeholder management and Corporate Social Responsibility (CSR). The organization system of Adidas would be developed on the pillars of leadership, strategy, structure and systems. The organizational system for the company should be designed in a manner such that the stakeholder groups of the company are adequately engaged in the management processes and so that the stakeholder groups are provided with adequate levels of empowerment to influence the functions and decisions at relevant levels of the company. Figure 1: Internal Elements Critical to Building Meaningful Stakeholder Relation (Source: Johnson, 2007) The key internal elements that should be employed for building up an organizational system that would help to build meaningful stakeholder values and relations are leadership, structures, systems, organizational behaviour and organizational resources and capabilities. The organizational system design for Adidas is done in a manner that the entire organization focus on fostering growth and profitability while establishing its image as a sustainable and responsible company which pay adequate degree of attention to the interest of its core as well as the fringe stakeholder groups. The organizational system of Adidas is developed and designed on the basis of the mission and vision statements of the company as per which, this company has prescribed clear priorities and values for the company so that the future strategic direction of the firm can be decided in a clear and beneficial manner. A corporate sustainability model or framework which encompasses the economic, social and environmental performances of the company would help to create suitable opportunities that would help to engage the stakeholder groups and also ensure the creation of value for all the direct and indirect stakeholder of the company. The organization system of Adidas should be developed on the platform of sustainability, ethical principles and social and environmental compliance in the domestic and international operations. Figure 2: Corporate Sustainability Model designed by Epstein (Source: Huczynski and Buchanan, 2011) As per the Corporate Sustainability Model designed by Epstein (2008), the case company should develop an organizational system framework in which the company employs sustainability strategies that would help to identify measure and integrate the economic, social and environmental impacts of the company into the corporate decisions and strategy formulation (Epstein, 2008). This framework can help Adidas to successfully manage the environmental, social and economic risks and impacts associated with the business and steer the business in the right direction to increase the profitability, viability and long term sustainability of the company. The various inputs and processes of the company that impact the stakeholder reactions and sustainability performances should be considered and implemented to drive the long term business and corporate financial performances. The inputs, processes, outcomes and outputs of the corporate sustainability model can be used in the formulation and implementation of a sustainability strategy or the company which would consider the broad external contexts, the business context, the internal contexts as well as the financial and human resource management contexts. Additionally, the sustainability strategy, sustainability programs, initiatives and structures are adequately designed for the management of the interest of the primary stakeholder groups in the most feasible and value adding manner. The development of an organization system that supports the sustainability performance of Adidas and helps to negate the derogatory impacts of the corporate activities of Adidas on the environmental, economic and social constructs of the society should be done to effectively engage the shareholders of the company and create value for them (Huczynski and Buchanan, 2011). Also, the stakeholder reactions of the company are appropriately included in the organization system design or driving sustainability and performances. The outcomes that are decided for the sustainability initiative of Adidas are the long term financial performances of the company and the sustainability performance of the company in the market of the United States of America. The key steps of developing an organizational system would include the identification of the primary and secondary stakeholder groups of Adidas, employing suitable stakeholder engagement and empowerments strategies, analyzing the risks of and externalities related to the business and its stakeholders, formulating strategies to management and mitigate these risks and externalities and integrated these aspects with the informal organization systems like leadership, people and culture. 3. Stakeholder engagement The engagement of the stakeholder groups remains a major concern of developing the sustainability strategy of any company. The company should focus on increasing the quantity as well as the quality of stakeholder engagement as a key technique for corporate risk mitigation (Laszlo, 2003). Identification of two main stakeholder There are two main types of stakeholders in a company who are the core stakeholders and the fringe stakeholders. The core stakeholder groups of a company are the visible stakeholder groups who have sufficient power to impact the business and corporate decisions of the company due to the legitimacy and power of these stakeholders. The fringe stakeholder groups are remote and comparatively disconnected groups of stakeholders who have limited impact on the decisions and functions of the company. The two core stakeholders of the business plan for Adidas include the employee group of the company and the environmental groups. The increasing stringency of the labour laws and labour guidelines and policies across the world have made it necessary for all types of companies to ensure that the employee groups of the firm are adequately managed and supported. Two major externalities are identified for the selected primary stakeholder groups of the business plan. These include the environmental externalities and the social and political externalities. The externalities and business risks associated with these two key stakeholder groups are high for a company like Adidas and astounding in an industry which is majorly susceptible to labour rights issues, environmental hazards like environmental degradation, pollution, carbon footprint, and release of greenhouse gas emissions and unethical issues like sweatshop practices, unfair labour practices, exploitation of labour etc. Additionally, the social and political constructs and systems of every country of operation play a major role in driving the risk and contingencies of Adidas while functioning in these regions. The activities and decisions included in the new sustainability model of Adidas may impact the stakeholder groups and also increase the intensity of the risks as identified before. However, the examination and management of the externalities can also help to Adidas to tap in the emerging opportunities in the industry and help the business to further establish its image as a suitable and responsible brand among the global stakeholder groups. Examination of the externalities Both the environmental and social externalities related to Adidas and its stakeholders are studied from a perspective of adherence and compliance. The study of the externalities is done in a manner such that both proactive and reactive measures can be taken to manage the externalities and risks associated with the sports lifestyle goods company. i. Environmental externalities (Life Cycle Assessment) The use of a products Life Cycle Assessment (LCA) tool is made for evaluating the environmental externalities associated with the case company. The Life Cycle Assessment (LCA) is used as a design discipline for minimizing the environmental effects of the material usage, technology, products, processes, activities, systems and strategies as used in Adidas in its entire value chain and supply chain management frameworks of the company. This assessment tool is used to identify and distribute the life cycle costs related to the costs of manufacturing and distributing a product including the capital costs as well as the disposable costs which are amortized over a year for the accounting purpose of the company. The use of a Life Cycle Assessment (LCA) method of accounting would not only help to control the environmental externalities faced by Adidas, but can also be used to control the social and political externalities to a substantial extent. Environmental externalities like extensive pollution created by the manufacturing and distribution processes, wastage released in the production and supply chains of the company and use of resources form the external community are some of the key issues faced by the company. The establishment of a compliant, lean and green supply chain system is a necessity for functioning in the current environment conscious corporate world. This may cause initial expenses for the company but is likely to generate higher returns in the long term scenario of the business. The reruns are in the form of financial gains, brand reputation as well as corporate sustainability and profitability (Schaltegger, Burritt and Petersen, 2003). ii. Social and political externalities There are major social and political risks associated with the business plan formulated in the project. The social risks are especially high in the case of Adidas. Issues like unfair labour practices, low payment of wages, exploitation of cheap labour resources and sweatshop practices that are especially relevant in the large scale goods manufacturing industry may cause far reaching social and political externalities for the case company, Adidas. Non compliance and violation of the prevailing country-specific and internationally established policies and guidelines related to the labour market and the labour economics are other major political and social externalities that, if not managed properly, may lead to major threats and constraints in the way of the sustainability of the organization (Schaltegger, Burrit and Petersen, 2003). Apart from these, the fact that the global consumer groups have become highly conscious about the various negative impacts that the functions of a multi-national company may have on the society and community in which it operates may also pose as a main social externality in the case of Adidas. Political issues prevailing in the specific country, which in this case is the United States of America should also be adequately managed and mitigated so as to ensure the long term success and sustainability of the business. Management of the social and political impacts that are produced by the products and processes of the company is a necessary part of the corporate sustainability model. The growth of a conscious group of global customers and other stakeholder groups can cause major externalities of a company like Adidas because of its transnational nature of functioning and because, it is major employer of the labour resources in the third world countries. Any kind of contingency and legal issue faced due to the infringement of labour laws and labour market policies can cause the loss of reputation as well as lead to monetary and non monetary losses for the company which may be time and cost incurring for the business. Two main stakeholder-engagement initiatives The development, establishment and implementation of the stakeholder engagement actions and initiatives in a company are necessary for ensuring the sustainability and competitive advantage creation for the business in the medium to long term scenarios of operation. The effective engagement of the stakeholder groups is necessary to ensure that the impact of the different externalities and risks involved in the business are minimized (Bekefi and Epstein, 2008). Also, the control of the social, political and environmental externalities in an effective manner can help the organization to effectively engage and involve the stakeholder groups to work towards the achievement of the organizational goals while ensuring sustainability and profitability for the business. Suitable feedback mechanisms can be used as an important element of the corporate sustainability model so that sustainability initiatives can be implemented in all the developmental and functional aspects of the case company to reduce the environmental, social, political and other external constraints and challenges that may affect the operability and sustainability of the company. Figure 3: Stakeholder engagement matrix. (Source: Bell and Morse, 2003) Stakeholder engagement can be done through the use of a number of strategic initiatives that would act in a bi fold manner to also reduce the social, environmental and political externalities associated with the company. Two main stakeholder initiatives that can be used to support the business objectives and CSR objectives of Adidas understand the stakeholders of the company and their primary needs and demands and building trust and communication with these stakeholder groups through suitable feedback and communication mechanisms employed in the company. These initiatives would include actions and plans that are aimed at develop the corporate social responsible image and long term success of the company. The understanding of the primary needs of the labour resources and other human resource groups of the company is a pre requisite fro functioning ethically in a globally integrated corporate environment in which all the stakeholder groups including customers, governments, human right activists, environmental agencies as well as the international regulatory authorities like the International Labour Organization (ILO), World Health Organization (WHO), International Monetary Fund (IMF) and the United Nations (UN) are prominently active. Initiatives must reflect at least 2 of the aspects of process improvement The initiatives of stakeholder engagement should be reflective of different aspects of process improvement in the organization. This means, that in case of the case business plan, the aspects of process improvement like re designing of processes and products, organizational learning, rethinking and selection of markets and internal reporting should be designed such that the interests of the organization and its stakeholder groups are adequately mirrored in the stakeholder management initiatives designed and implemented by the management of the company (Epstein, 2008). Performance measurement should be done in the company as a part of the risk management and stakeholder engagement processes. The effective stakeholder empowerment and engagement and risk mitigation can be done by identifying the risks and the political effects of these risks and externalities on the core and secondary stakeholder groups, measuring the impacts and selecting and analyzing the probable solutions for these impacts and risks. This should be followed by the establishment of the most feasible and implementable solutions for stakeholder engagement, stakeholder empowerment and externality and risk management. The process should also include the communication of the results of these initiatives to all the relevant stakeholders of the company followed by the periodic review and monitoring of the progress of these performance enhancement initiatives (Uhl, 2004). iii. System of performance metrics A system of performance metrics is designed for the measurement of the goals after the implementation of the initiatives in the company. The key performance metrics that are to be used in Adidas are capabilities, processes, strategies, needs and wants of the two primary stakeholder groups and the needs and wants of the organizations from the two stakeholders. The performance plan of the company should be based on the performance prism as given in the figure below. Figure 4: SWANS and OWANS: The Performance Prism (Source: Epstein, 2008) Trust, motivation, representation and communication would be the main performance measurement metrics that should be used to analyze and evaluate the condition and state of stakeholder management within the company by comparing the states before and after the implementation of the two main initiatives for developing strategic sustainability for the company. The key performance metrics selected for stakeholder engagement should be the alignment of the corporate strategies of the company with sustainability initiatives and objectives, diversity and number of business units, the impact of the sustainability initiatives on the processes, product and industry, sustainability component as embedded within managerial performance measurement and other sustainability related resources and capabilities available within the organization. iii. The ways in which the two initiatives would fulfil the CSR plans for Adidas The two selected initiatives can help to reduce many environmental, political and social impacts faced by the company. This is extremely necessary because the social and environmental impacts of the company may practically seem to have no major impacts in the current situation of the business but they may affect the profitability, operations as well as the sustainability of the company in the medium to long term scenarios. The externalities that may have been internalized in the company in the future period would be adequately controlled by the implementation of these two selected Corporate Social Responsibility (CSR) initiatives to fulfil the pre defined Corporate Social Responsibility (CSR) plans and vision of Adidas as developed in the business plan. The two initiatives of stakeholder management and engagement viz. identifying the needs and interests of stakeholders and developing a just, unbiased and transparent organizational environment are likely to help Adidas in achieving higher brand value and reputation among the global citizens. Catering to the needs of both the primary and secondary stakeholders including the employees, customers, government, NGOs, community groups, human rights activists’ groups, environmentalists and business partners is a pre-mandate for ensuring that the philanthropic objectives of the company are suitably achieved while remaining rooted to the core corporate philosophy, mission and vision statements of the company (Waddock and Bodwell, 2007). The ways in which these two initiatives are supported by the comprehensive organizational system of Adidas The two initiatives as developed in the report are adequately supported and backed up by the comprehensive organization systems related to the case business plan. The comprehensive organizational system as developed for Adidas includes a consideration of the key stakeholders and enforces the principles of stakeholder engagement and stakeholder empowerment which can enhance the sustainability of the company to a large extent. The comprehensive organizational system as developed for Adidas would include the use of suitable internal mechanisms and procedures covering all the key areas of the company, human resource management, technology, manufacturing, supplying chain, selling and marketing, product designing and financial departments. The presence of a robust internal organization system would make the company capable of establishing the selected stakeholder engagement initiatives and would help to attain the key strategic management objective of creating stakeholder value. The consistent work performance measures and work policy guidelines would help to ensure that all the processes of the company are carried out in compliant, ethical and unbiased manner so that the best interests of the labour resources can be considered. In addition to this, the use of the green supply chains, extending the initiatives of Corporate Social Responsibility (CSR) in different areas and engaging appropriately in innovative and value adding philanthropic activities would also make sure that the company remains at a commendable and strong position in the arena of corporate sustainability and brand value (Edwards, 2005). A suitable leadership management system employed in the organizational construct of Adidas would help the managers of the company to support the formulation and implementation of the stakeholder engagement, stakeholder empowerment, corporate social responsibility (CSR) initiatives and other strategic management functions in an efficient and value adding manner (Vogel, 2005). Additionally, the existing processes and systems followed in the organizational context like adherence to ethical and legal regulations, active engagement and management of employee groups, consideration of customer interests and preferences and the adoption of sustainable practices like green supply chain, environment friendly manufacturing processes, recycling of products and waste management also act as key support systems for the development and implementation of the strategic initiatives designed for advanced stakeholder engagement, empowerment, management and overall stakeholder value creation. Thus, the organization system as designed for Adidas would help to implement the stakeholder engagement initiatives by acting as a backbone for the company in terms of employing suitable feedback mechanism, actively considering the interests of the key stakeholders and developing suitable systems and functions to foster the growth and development of the stakeholders along with that of the organization. The management of the units included in the corporate sustainability model including internal context, external context, business context and human resource management are linked together to form the basis for leadership in the organization which can help to steer the strategic management plan for sustainability in the desired direction. Along with these, a supportive, open and unbiased organizational culture would help to ensure the maintenance of fair treatment for the internal stakeholders of the company, thereby making it easier to employ the chosen stakeholder engagement initiatives and action plans. A well integrated and well managed organizational construct would ensure that the strategic managers of Adidas are able to seamlessly integrate the performance management and stakeholder engagement initiatives and mechanisms through different levels and departments of the company, thereby ensuring better coordination and communication, both of which are necessary for stakeholder engagement. The established dimensions of an organization system including organizational environment and organizational behaviour can deliver superior performances in the sustainability initiative management through the creation of an assimilative and transparent environment in which it would be easy to actively engage and empower the internal stakeholders. The presence of resources and capabilities within the organization would enable the mangers to employ the strategic initiatives to engage the stakeholders and empower them to the desirable extent. The availability of adequate levels of physical and financial resources would ensure that the implementation of the sustainability plan is not halted midway due to the lack of any kind of assets or resources. References Bekefi, T. & Epstein, M. J. (2008). Measuring and Managing Social and Political Risk. Strategic Finance, Vol. 14(1), pp. 33-41. Bell, S. & Morse, S. (2003). Measuring Sustainability: Learning from Doing. London: Earthscan Publications Edwards, A. (2005). The Sustainability Revolution: Portrait of a Paradigm Shift. Philadelphia: New Society Publishers. Epstein, M. (2008). Implementing Corporate Sustainability: Measuring and Managing Social and Environmental Impacts. Strategic Finance, Vol. 24(1), pp. 25—31. Epstein, M. (2008). Making Sustainability Work. San Francisco: Berrett-Koehler.  Huczynski, A. & Buchanan, D. (2011). Organizational Behaviour: An Introductory Text. Harlow: FT Prentice Hall. Johnson, M. (2007). Stakeholder dialogue for sustainable service. Karlstad: Karlstad University Studies. Laszlo, C. (2003). The Sustainable Company: How to create lasting value through social and environmental performance. Washington DC: Island Press. Schaltegger, S. & Wagner, M. (2006) . Integrative management of sustainability performance, measurement and reporting. International Journal of Accounting, Auditing and Performance Evaluation, Vol. 3 (1), pp.1–19. 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