Corporate Governance in Business - Case Study Example

Corporation Sustainability Name: University: Course Title: Instructor: 1.0 Introduction Corporate governance is rooted on meeting expectation of various stakeholders in a business.1 Corporate governance can be exhibited through avenues such as corporate social responsibility which include issues such as corporate sustainability or corporate environmentalism.2 Corporation sustainability grew in respect to realisation that businesses as major consumers of ecological goods should in forefront in curtailing environmental issues associated with their processes which may or have resulted into environmental degradation such as pollution (air, land & water), climate change & global warming, reduction of vegetation cover/ desertification and so on. Natural capitalism obliges corporations to place value on the ecosystem services that they derive from ecology and thus, they should endeavour to composite for the same.3 As such, using the case study of McDonalds Australia and Nokia Company, the premises of this paper is to evaluate the practices of governance in respect to corporation sustainability. In undertaking the assessment, the paper adopts a two pronged approach. In the first instance, the paper reviews corporate governance and meeting of stakeholders’ expectation. Secondly, the paper conducts theoretical review in respect to corporation sustainability. In this respect, the paper reviews important literatures that support the need to engage in corporation sustainability. The issues reviewed in this section include Kantian deontological expectations; natural capitalism and legal requirements. Thirdly, the paper examines the governance practices in respect to corporation sustainability using the case examples of McDonalds and Nokia Company. In this regard, the paper outlines practices within McDonalds& Nokia in relation to their operation processes such as production that addresses sustainability concerns such water & energy consumption; extension of sustainability to supply network by obliging suppliers to produce in environmentally acceptable standards, sustainability reporting within the organisation and production of sustainable products. The guiding framework for analysis is the one fronted by Lovins, Lovins & Hawken (1999, p.146-148) under natural capitalism framework that calls upon corporations to be proactive in limiting the wasteful and destructive flow of resources by ensuring that they invest in natural capital, shift to biologically inspired production approaches and increase of production of natural resources.4 2.0 Corporate Governance, Stakeholders Expectations & Sustainability Corporate governance is conceptualised as mechanisms and structures such as laws and rules put place by the management so as to govern the operations of the company. These structures and mechanisms stipulates the expected behaviour and mode of engagement in given circusmtsnaces.5 The ultimate context of corporate governance is to ensure accountability. The accountability concept in institutions rests on how business and their agenst meet the varied expectations generated internally and externally owing to the fact that different stakeholders have got varied vested interest.6 In any business organisation, there are different stakeholders with different expectations. For instance, there are the shareholders/ stockholders whose concerns are profitability. On the other hand, the expectation of government is for businesses to adhere to outlined rules by adhering to legal expectations. On the other hand, employees expect to be rewarded for their skills they render to the organisations. For consumers, their concern is to be offered with affordable quality products.7 The expectation that give rise to sustainability concern is the societal/ public and government concern in regard to protection of environment as result of the corporations’ utilisation of ecological goods and the impact their processes have on the environment such as pollution, ozone layer depletion and climate change. Corporation involvement in sustainability issues falls within the larger domain of corporate social responsibility.8 Corporate social responsibility is seen as “the responsibility of enterprise for their impacts on society”.9 Within the context of this paper the responsibility for impact is environmental based and thus, corporation sustainability is rooted on corporation taking responsibility in regard to their environmental impact. 3.0Theoretical Context for Sustainability There are various theoretical constructs that attempts at explaining why business organisations engage in sustainability reporting with the larger context of corporate social responsibility. The urge to engage in sustainable practices or the obligation to engage in sustainable practices, can be contextualised in regard to deontological ethical theory vs. purely profit driven business approach; natural capitalism and legal context. As such, this section outlines the various discourses that anchor corporation engagement in sustainability. 3.1 Deontological Expectations Within the first context (deontological expectation vs purely profit driven business approach), emerged out of the realisation that businesses constitute one of the social creations of humanity. Therefore as a moral agent, they are expected to adhere to ethical and moral expectations of the society.10 The growth of sustainability issues in corporations is anchored on the realisation that businesses are major users of the ecology or their operations while in pursuit of profit have a negative impact on the environment and thus, there is a need to mitigate these negative impact by placing mechanisms that would guarantee protection of the environment. Sustainability implies putting in place “the establishment of appropriateness of an organisation’s business practice”.11 According to ASX Corporate Governance Council (2007, p.21), the morality in the argument is that businesses do not exist to purely address shareholder interest of profit making alone, but also they have obligation towards other concerned entities with vested interest in their operations. One of these responsibilities would translate to taking care of the environment. In this regard, businesses should streamline their internal and external operations so as to reduce environmental degradation and report consistently on what they are doing not to undermine environmental sustainability. In a nutshell, the whole debate of Kantian Deontological ethics dictates that moral agents such as businesses while engaging in any decision or processes should take into consideration the benefit of the public.12 The discussion above attempt at linking social decay with environmental decay or the reverse. 3.2 Natural Capitalism The second aspect is premised on natural capitalism. The underpinning realisation is that how human beings have been conducting their activities while in pursuit for industrial development and modernism through processes such as extraction resources and disposal of wastes does not reasonate well with ecological principles13. The discussion on natural capitalism forms the core to corporation sustainability and gives birth to legal regulations. This therefore calls for paradigm shift in how businesses conduct their operations. In this regard, the calls is for business organisations to significantly enhance the productivity of natural resources; inculcate a new front in how production is conducted by adopting biologically rooted production models; adoption of solution-based business models and reinvest in natural capital.14 The ultime realisation is that the present stakeholder oriented approach in business that does not value the significance of ecologily services is a path towards doom as humanity cannot survive without these unqintifiable natural services.15 In this regard, it seen that business have thrived in destruction of environment through over exploitation, introduction of non-biodegradable waste and wanton destruction without thinking of the impact they have on the sustainability of environment in a long term perspective yet the reality is that natural system offers diverse services to both humanity and the rest of living things that have not artificial substitution. For instance, it is not easy to create oxygen that could satisfy the needs of the whole world yet nature avails it free (Hawken, 1997, p.41).16 Additionally, environment provides water sheds, fertile top soils for agriculture, carbon sinks and so on.17 3.3 Legal Requirements The third relates to the legal stipulation especially within the Australian context. There is the realisation by businesses that failure to adhere to expectations especially legal ones can lead to legal fines. Legal responsibility is critical in inculcating various best practices that aids in addressing best environmental practices. For instance, it has contextualised within law issues such as preservation; conservation; re-use, recycle & reduce (RRR) concept; leadership in energy & environmental design (LEED); social/ sustainability reporting and polluter pay principle(PPP) as informed by environmental audits (EU), environmental impact assessments (EIA) and environmental management plans (EMP). Within Australian context, there numerous legal stipulations relating to sustainability and they include but, not limited to Ozone protection and synthetic greenhouse; Carbon Credits (Carbon Farming Initiative) Act 2011; Hazardous Waste (Regulation of Exports and Imports) Act 1989; Environment Protection and Biodiversity Conservation; Act 1999 and Clean Energy Act 2011. For instance, section 7 of Environment Protection and Biodiversity Conservation (EPBC) Act 1999 (Commonwealth consolidated acts 1999) states that any entity is liable for criminal prosecution in event of violation of the act. For corporation Chief Officers, section 493-496 states that they are liable for any misdeeds under their watch. Moreover, section 101-105 and 458-462 of EPBC obliges corporations to engage in best practices such as sustainability reporting through environmental audits and environmental management plans. 4.0 Case Studies of Corporations According to Olson (2009), corporation sustainability can be analysed in respect to how business organisations seek to curtail or limit the negative environmental trail resulting from their activities as they pursue profit aspirations. This should be evident how they design their quality production processes, design processes and materials recycling techniques. OECD (2008) notes that corporation sustainability should be evident in how they engage in quality substance management by ensuring that materials employed in designing & production processes are sustainable in respect to ability to recycled. The second concern is the minimal energy use or development of alternative sustainable energy sources for operations and production processes. The third is the employment of the concept of reduction, re-use and recycling (RRR) approach in regard to waste products. However, the most comprehensive framework that encapsulates Olson (2009) & OECD (2008) is the analysis framework fronted by Lovins, Lovins & Hawken (1999) that analyses how corporations can aid in guaranteeing natural capitalism in a sequential manner by ensuring protection of natural processes. Secondly, how corporations should invest in biologically inspired models so as to produce environmentally friendly products. The final one is how firms are re-investing back into the environment so as to enhance its productivity.18 4.1 A Case Example of McDonalds McDonald operates within the food industry and has over 32, 000 restaurant spread across the globe. It in their wide network that they believe they can have positive significant impact on issues of environment. In this regard, McDonald has placed in administrative and practical strategies for administering and delivering sustainability issues. At the top is the board of directors which has world corporate relation council. The world corporate council policies are actualised through corporate social responsibility department; global environmental council; quality systems board and sustainable supply steering committee.19 McDonald’s exhibits sustainability is in regard to dramatically increasing productivity of natural resources. According to Lovins, Lovins & Hawken (1999, p.148) this lies in implementation of strategies geared towards limiting waste of energy, water resources and other significant natural resources and materials thata re significant to human survival and cannot be easily be offered artificially. This is attained through implementation of whole system design and adoption of innovative technologies.20 McDonald Australia (2010, p.20) opines that they indeed contribute to various environmental issues that impacts on sustainability and quality of environment and thus, they seek to limit their energy utilisation, water consumption, greenhouse gas such as carbon dioxide emission and waste management. For instance, the company appreciates that they are one of the contributors to greenhouse gas emission especially carbon. In this regard, they are rated as the first quick service restaurant to sign Green House Challenge Cooperative Agreement. Equally they are constant participant in Energy Efficiency Opportunities Program that dictates to the management to inculcate energy efficiency measures and stick to Greenhouse Gas Emission Reporting Act.21 In practice, McDonalds has implemented various sustainable practices in their production processes and in their supply & logistics networks. For instance, the firm has been deeply engaged in protection of rain forest for over 20 years. In this regard, the policy of the company is not to buy supplies from deforested zones of Amazon in Brazil. However, there caveat does not stop from that point. In realisation that they equally need to empower farmers, the company invested in Land Management Committee in collaboration with World Wildlife Fund.22 Packaging is integral in their process where burger packaging is done in a carton derived from virgin fibre with 745 that is mostly source from forest that are at par with the required management standards. Such endeavours has placed the firm of an upward path in conservation as it was recognised in 2008 as the best in sustainability packaging innovation by Europe’s Pro Carton ECMA in 2008.23 The waste reduction and recycle has been experienced in McDonald France where in 2009 they integrated the frappe cup and lid made of 40% recycled plastic as the preferred packaging material . This recycling aids in reducing landfills and virgin resins. However, this is limited to France as McDonald USA has implemented numerous strategies of recycling and waste reduction. For instance, the firm in USA transitioned from Clarified Polypropylene (CCP) for McCafe beverage cups that has aided in reducing costs and ensuring environmental benefits. McCafe beverage cups utilises 20% material as compared to PET. This implied a reduction in material use and reduced cost plus a reduced 20% in solid waste generation.24 Equally, the firm is out to manage utilisation of inorganic pesticides in the production process of the most raw materials that they rely on. This they have attained through integrated pest management especially for suppliers of potatoes who have engaged in voluntary audit/ environmental scorecard on utilisation of fertilizers and water.25 The process is to ensure limited utilisation of natural. For instance, McCain Foods who are one of the chief potatoes suppliers to McDonald’s in their scorecards deliberately engaged in the reduction of electricity use to biogas utilisation. This saw their biogas uptake increase from 65% to 86%.26 Additionally, under the framework of ethics, environment & ethics the firm has invested in sustainable land management program in collaboration with her suppliers, environmental score card for sustainable supply and sustainable fisheries.27 Furthermore, under the 20 years collaboration programme embodied under the waste reduction action plan for the US saw elimination of 300 million pounds of wastes.28 Moreover, the firm has initiated plans to curtail their energy consumption and reduction of their overall energy consumption patterns. For instance, the fryers utilised by McDonald in making French Fires, consumes 4% less energy.29 Nevertheless, this is not limited to energy utilisation, but to a holistic approach that is premised in Leadership in Environmental and Energy Design. Such practices is being rolled out in various countries. furthermore, since 2007, the firm has been an adernt implementor of U.S Green Building Council (USGBC) frameworks in nearly all of their premises in US.30 4.2 A Case Example of Nokia Nokia is one of the leading global telecommunication companies. Nokia’s environmental vision is to ensure individuals are connected in a sustainable manner. In this regard, the firm aims at being in forefront of achieving a sustainable environment by limiting extreme environmental impacts in all industrial operations, logistics and in mobile devices.31 As such, the firm in a collaborative framework with suppliers and distributors embarked to promote most suitable environmental practices.32 Olson (2009) notes that the focus of Nokia is to engage in a holistic process that is initiated right from raw material extraction, transportations, manufacture, supply, waste treatment through recycling. According to Nokia (2014b), the plausibility of such aspiration is made reality by their investment in high quality production & design processes and advanced recycling techniques. In this regard, their environmental strategy is rooted on urge to guarantee quality substance management by ensuring contents utilised in producing mobile gadgets are sustainable. Equally, they seek to use environmentally friendly materials such as recyclable materials. Secondly, they seek to reduce their energy consumption in all their industrial processes. The third one is not linked to the process, but the product. In this case they actively engage in recycling old mobile phones. Finally, they seek to utilise empower Nokia mobile users on how to manage environmental issues through their Ovi store. The interesting approach by Nokia is there approach known as ‘green logistics’ in this approach they seek to inculcate what they term as ‘life cycle thinking; (Nokiasiamensnetwork, 2008). This framework offers guideline on how to curtail emission of greenhouse gases in all aspects of operations. One of the approaches under the network is to invest in alternative transportation mediums that have less impact on the environment. Additionally, they are investing in alternative packaging that is biodegradable, optimisation of networks and engagement in research and development on environmental issues. For instance, in suitable areas, the company is shifting strictly to rail and sea as the most preferred transportation mode. This is based on the comparative realisation that per cubic metre square they contribute to less carbon dioxide as compared to air and rod transport.33 Under the green logistics, they are keen in limiting green house gases. In this regard, they seek to ensure that all operations adhere to green house gases (GHG) protocol’s standards.34 5.0 Conclusion The aim of the discourse was to examine and outline governance practices of a corporation. Narrowing the discussion within the context of a corporation sustainability, the paper examined how McDonalds and Nokia Inc. engages and practices sustainability. In the first instance, the paper examined corporate governance framework and how it is utilised to meet stakeholders’ expectation. Secondly, the paper analysed the theoretical framework that cajoles corporations to undertake and incorporate sustainability in their operations/ production process. The paper realised that this is premised on deontological expectations, natural capitalism and legal requirements. Finally, the paper assessed sustainability in McDonald Australia. It was realised that McDonalds and Nokia, engages in sustainability practices through their production processes. This is highly evident in handling on utilisation of energy; utilisation of water; reduction of waste emission through biodegradable products and sorting of wastes in their franchise outlets. Secondly, the same process has been extended to the logistics and supply networks where they purchase from sustainable suppliers and empowers them to be sustainable. This is also referred in their operations as green logistics. Finally, they engage in sustainability reporting outlining what proactive environmental issues they are addressing. 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