Contemporary Issues in Management - Term Paper Example

Contemporary issues in management Contents Section Pg. 2 2. Section 2 …………………………………………………………….Pg. 8 3. References …………………………………………………………...Pg. 14 Section 1: Benefits of going green Is going green an empty fad or a powerful tool for competitive advantage for modern organizations Environmental sustainability has recently gained widespread significance, and has been increasingly accepted to be among the best practices in recent times, across various industries. Various companies today are going green by adopting eco-friendly policies and approach. Whether such a practice is an outcome of institutional pressure, or a regulatory compliance or just a mere fad, is a question that warrants attention and debate. However, regardless of the reasons, the fact that companies today are increasingly adopting environmentally friendly practices across various sectors and industries cannot be denied. This paper on ‘Benefits of going green’ seeks to analyze and examine the recent trend and ascertain whether it is a mere fad or in fact a strong tool of achieving competitive advantage used by modern organizations. According to Lawrence & Morell (1995) firms adopting environmentally friendly practices tend to do so, in order to garner benefits which are awarded to them by way of government regulations, reduced costs, subsidies, as well as in order to avoid any untoward reactions such as public opposition, being targeted by green activists for non-compliance, and other similar critical setbacks. No common consensus has been arrived so far, with regard to reasons for adopting green practices by organizations. According to some researchers, the basic reason for adopting green practices for some companies is the competitive advantage it offers (Dean & Brown, 1995; Sharma & Vredenburg, 1998; Christmann, 2000) while according to other researchers, it is done to comply with the demands of the consumers and the external environment. Organizations across various industry sectors are now increasingly adopting green practices. Some such examples are discussed hereunder: Banking sector: Bank of America The Bank of America Corporation is America’s largest multinational banking corporation with over 5000 retail banking offices; 33 million consumers, 16700 ATMs and an award-winning online banking system with a recorded 12 million active online users (Bank of America, 2011). It introduced new policies focused on environmental sustainability, and to continue its tradition of environmental stewardship by developing and implementing a novel paper procurement policy aimed at reducing the use of paper, and hence contribute to the protection of worlds forest ecosystems. It stated maintaining the ecological health of forests" as its key aim, to address issues related to climate change and global warming, and preserve endangered forests. According to this policy, the suppliers of paper products to the bank were required to comply with all the laws and regulations applicable to them with regard to timber harvesting and ensure that their third party suppliers strictly adhered to these laws and regulations. The paper procurement policy was mainly developed to attain three primary goals viz-a-viz, reducing paper usage and encourage recycling; encourage sustainable forest practices; and protect endangered forests by reducing their paper usage (Bank of America, 2011). It launched its first full fledged environmental initiative in the year 2007 with a whopping $20 million investment, in order to support environmentally sustainable business practices which involved such activities as lending, investing, philanthropy as well as development of green products and services. This project proposed to advise its customers regarding environmentally sustainable products and help them in procuring such carbon efficient / green products. It also proposed to trade carbon credits for the purchase of green products, and offer better lending opportunities to its customers for creating and developing environmentally friendly products (Environmental Leader, 2007). Various other banks worldwide have now begun to adopt this trend. Although green banking is increasingly becoming a trend, it is not yet an established criterion for consumers to prefer one bank over the other; its significance is slowly catching on, and would prove to be highly beneficial in the long run. According to Porter & Van der Linde (1995) incorporating elements of environmental sustainability offers various benefits such as: it helps companies to project a positive image, maximize their revenues by way of increased social standing; and lower their operating costs. According to Miles & Covin (2000) the creditworthiness or image of a firm in the society is directly related to its activities and policies and adoption of socially relevant policies help firms in improving their goodwill, credibility, and reliability thus translating into greater consumer confidence and hence higher profits. Furthermore, it is also established through research, that companies and firms which are environmentally conscious and have a high and active social engagement policy as one of their key corporate agendas, are known to acquire better credit ratings, which translates into lower cost of debts (Bassen, Meyer & Schlange, 2006) and have a relatively lower cost of equity as compared to their non-green counterparts. Thus firms involved in borrowing and lending of capital are more likely to benefit from green initiatives, in the form of lower cost of debt or equity. The above point can be established with the help of the following case study: Retail Industry: The Home Depot Inc., The Home Depot is the largest retailer of furnishings and home improvement goods, in the United States. It is involved in selling of home improvement, construction products, and services across various stores located in the United States and abroad. The company received severe criticism for its environmentally harmful policies way back in the year 1998, and was on the receiving end of harsh public reactions, where environmental activists held demonstrations and protests to prevent the destruction of ancient forests. The Great Bear Rainforest was home to rare white Spirit bear and rich salmon streams, was being destroyed by the company for its own commercial benefits. After the company was identified as the world’s largest trader of old-growth wood products by the Rainforest Action Network, the company encountered strong protests from environmental groups across the nation, forcing the company to retract its trade policies (GreenPeace.org, 1998). In yet another incident, the company was embroiled in another environmentally sensitive issue, where it was accused of being involved in an environmentally destructive project which involved destruction of rare forests and massive dam building, thus harming the natural environment and distorting the ecological balance in the process. Home Depot was involved in a project that involved building dams on the wild rivers on South Americas Patagonia region which is home to big rivers and an area surrounded by lush green rainforests. The building of such dams in the region involved clearing up of these precious forests, which would ultimately lead to disruption of the ecosystems. Regardless to add, this project too, faced large scale opposition from protestors and local communities alike, thus giving rise to the Dam Home Depot, Save Patagonias Rivers movement, which sought support from customers of Home Depot asking them to shun their products and pledge support in favor of the movement. The protestors challenged the companys commitment to environment forcing it to walk the talk (InternationalRivers.org, 2011). It has been observed through empirical research, that customers today have become highly environmentally conscious and responsible and are the key drivers of the green corporate movement, thus pushing firms to adopt and implement sustainable practices. Such a trend is now observed across all industry sectors, where the end consumers are calling the shots by screening firms for their environmental engagement. Incorporating green practices, thus, has become a norm dictated by consumers, pushing firms to comply in order to retain their competitive positioning in the industry as well as their market share (Creyer & Ross, 1997; Vandermerwe & Oliff, 1990). Firms which indulge in activities which are perceived to be environmentally harmful have faced flak and severe criticism resulting in boycotting of goods to filing of criminal lawsuits by environmental non-government agencies. There is ample evidence which suggests that companies which have chosen to revamp their past image have relied heavily on environmental causes, as a shield to improve their image and achieve good public standing. It has also been observed that such companies are also highly successful when they are sincerely committed to their cause (Yoon, Gurhan-Canli, & Bozok, 2006). Consumers today are aware of the environmental issues as never before, and are actively taking part in conservation of the same. Companies, which shun such issues, are likely to face severe protests and loss of social standing in the market, due to their ad hoc policies. Thus, in order to retain their goodwill in the market, and promote a superior image organizations today are compelled to project an environmentally conscious image. It has been documented through research that companies with green initiatives as its key policies are able to retain a better workforce and attract committed workforce, thus translating into better productivity and hence profits (Turban & Greening, 1997). It is undeniable that human capital is the key to success and is an inevitable tool for value creation in modern times (Zingales, 2000). Attracting and retaining a strong and dedicated team of skilled workers is hence inevitable for companies. Section 2: Mini Case Restaurants feature as one of the most leading users of natural and non-renewable resources within the retail industry sector. They highly rely on non-renewable sources of energy such as water which is extensively used for washing, cleaning, cooking, heating etc. Electricity and power usage is also relatively higher, for running high-powered kitchen appliances; while raw materials for food preparation is solely procured from the natural environment. Thus, it is undeniable that the food retailing and hospitality industry relies heavily on the natural environment for achieving their corporate goals. The amount of wastage is hence, a major cause of concern for firms within this industry. Wastage in the form of food, used kitchen appliances, disposable items such as plastic bottles etc; and other packaging materials used for delivery, contributes largely to landfills. The amount of wastage produced by restaurants annually is shockingly higher and yet very little attention is paid to address the issue (Nielsen, 2004). However, with the recent trend where there is a growing focus on environmental awareness displayed by firms across all industries, the efficiency and environmental commitment of restaurants is now being increasingly challenged at a global level. This case study deals with similar issues faced by Mr. Taylor, the Environment and Ethics Manager of a UK based Asian restaurant chain, regarding its ethical and environmental policies. The restaurant is faced with a wide range of issues such as: dealing with suppliers with poor human/animal rights records; declining to use local suppliers; excess executive pay and bonuses; unhealthy products - ingredients and foods; as well as lack of green initiatives with regard to energy usage, waste disposal, non-seasonal food etc. The same is discussed by way of various case examples from restaurants across UK, to display the best practices within the industry. Dealing with suppliers with poor human/animal rights records: Recently there has been a growing trend whereby ethical consumerism has taken center stage and is rapidly gaining wider acceptance and significance as one of the key drivers of change in restaurants and the hospitality industry in general. The consumers have matured over the years and now are increasingly aware of their rights and the products they buy or services they use. Such growing awareness among consumers has led to the creation of pressure groups which seek active compliance to environmental goals (Harrison et al., 2005). Furthermore, these consumer groups are now pushing for fair-trade practices, which are eco-friendly; conservation driven and are animal friendly approaches to doing business. For instance, recently, celebrity chef Gordon Ramsay faced public protests from PETA activists and other animal rights groups for endorsing horse meat, and questions were raised regarding the ethical treatment of animals while procuring the meat (Daily Mail, 2007). Similarly protests were waged against Taco Bell, the giant multinational food retailer, by a group of coalition workers to oppose the meager wages paid to the farmers, and against the inhuman treatment meted out to them. The Boot the bell campaign which lasted for four years, ultimately paid off, with the former agreeing to the demands made by the workers and finally increasing the wages paid to them (NY Times, 2005). The association of international environmental agencies such as GreenPeace further helped in achieving the desired goal. It is owing to such efforts by active environmentalist and human rights group that today most of the restaurants are compelled to adopt fair trade policies especially with regard to their suppliers and ensure that they do not endorse forced / child labour and meets the demands of the workers with regard to fair compensation (PBS.org, 2011). Any association with organizations which have a poor history of non-compliance to global human / animal rights regulations would endanger the position and social standing of the restaurants in question, leading to large scale public outrage and loss of reputation and good will in the market. Managers must hence, be careful to deal with suppliers who have a clean record and who strictly adhere to eco-friendly and ethical ways of doing business. Declining / Reluctance to use / rely on local suppliers and use of Unhealthy ingredients and foods: This is one of the most critical issues which need to be addressed at the earliest. Most of the restaurants today are relying more and more on home-grown products since it is energy efficient way to do business. Local suppliers help save fuel costs, which would otherwise be spent on transporting, importing materials. It also helps save packaging costs, and avoid in creation of more solid waste. Furthermore, not only is relying on local suppliers an eco-friendly approach but it also helps in contributing and encouraging the local businesses and thus pave way for a stronger and better economy. Restaurants currently adopting such practices within UK, include the St. Pauls restaurant located in integral part of London. This restaurant largely depends on local suppliers for its key ingredients as a part of its policy. This helps them ensure that the products are of good quality, and healthy. For instance, the R-Oil, is an ingredient which is produced locally using indigenous techniques devoid of any processing, thus ensuring maximum health benefits. Such an approach helps them in reducing wastage, packaging and hence their carbon footprint (St.Paul’s, 2011). Another such restaurant is the Noma Restaurant, which recently bagged the much coveted award as the world’s best place to eat (The Guardian, 2011). The restaurant has a policy of relying on local suppliers and even making some of its own ingredients in-house. It makes its own salting, smoking, pickling, drying and grilling and prepare their own vinegars and eaux de vies, rather than relying on outside suppliers. This is done to ensure better quality food to their customers. Furthermore, they largely rely on seasonal products such as fresh vegetables, herbs, spices and wild plants which is a healthier option as compared to canned foods (Noma.dk, 2011). Such a policy has helped them in retaining their numero uno spot, for two consecutive years. Their commitment to eco-friendly causes, has attracted customers and gained their confidence which is reflected by its immense popularity. Mr. Taylor, must draw parallels from the industry, and focus on using locally produced and seasonal ingredients in their restaurants. This would help them in not only cutting their costs (transporting raw materials) but also in improving their food quality, offering healthier alternatives to their customers and ultimately gain public confidence. The restaurant business and the hospitality sector in general, are heavily dependent on the consumers, and hence their preferences and choices must not be ignored. The industry is thriving at a point where consumerism is a key force, and companies and firms must make an effort to adhere to the trends and comply with the same, in order to thrive successfully. Excess executive pay and bonuses: Mr. Taylor’s organization is facing severe setbacks on various fronts, such as issues related to procuring of materials, to legal hassles which may project the firm in a negative light. Such negative publicity may prove to be extremely detrimental to their progress and change consumer perception against it. In such a situation, where the business is severely affected making excessive payments and bonuses to the staff, would prove to be disastrous for the firm. Mr. Taylor must control the payment of wages (costs) and focus on increasing their revenues, in order to avoid facing financial losses. Lack of green initiatives: As mentioned earlier, more and more firms across all industry sectors are now increasingly turning green. Those that have shown reluctance to such a change, have faced strong public opposition, leading to a complete shutdown of their respective businesses. Consumers today are more ethically aware and their decisions largely depend on the ethical approaches of the firms (Shaw et al., 2005). The products they buy or the services they receive are a result of a thoughtful decision making process which entails a careful analysis of the kind of organization and its background, and their own personal sets of beliefs. Reluctance to adhere to global trends, thus might put the restaurant out of business, and would prove to be fatal for the organization. Conclusion: Until recently the whole concept of going green was regarded as a passing fad, which had taken all the industry sectors by a storm. However, the existence of various green and eco-friendly firms which have been incorporated decades ago, indicates otherwise (Pizam, 2008). The debates however do continue to exist, with regard to the primary motive of business, where the purpose of corporate goals is questioned, i.e. whether the businesses exist to accomplish their profit motives or do they exist to cater for the larger and common public interest. The growing trend of environmentalism and the pressure exerted by peer groups seem to hint at a totally different picture altogether. There are some firms within various industry sectors who have adopted green initiatives as a reactionary measure rather than a proactive measure, and succumbed to the demands and trends of the external environment, while there are yet others who are "green" by choice. Regardless of the reasons behind going green, the fact that environmentalism is here to stay, is undeniable and inevitable. References: Bassen, A., Meyer, K., & Schlange, J. (2006). The influence of corporate responsibility on the cost of capital. An empirical analysis 2006. 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