Csr Reporting Of General Motors And Ford Management Essay
One of Corporate topic in the daily agenda of companies around the world is corporate social responsibility. Ethical and responsible direction has become one of the major goals of many companies. Companies employ multiple communication channels for transmitting their CSR actions to stakeholders. The Internet is one of these communication channels that has recently become important and has a prominent role for CSR communication (Basil & Erlandson, 2008) & (Golob(2006)). Hence, an effective and creative strategic plan is needed in order to communicate CSR through the World (taking into consideration sustainability report, GRI, and interactive indicators for a CSR corporate website). (Gomez, 2010).
Global expectations about the responsible role of companies in society are on the increase and the recent research on corporate social responsibility discourse shows that there have been developments of a variety of instruments that aim to improve, evaluate and communicate socially responsible practices. Scholars consider the notion of CSR has been in existence since the 1950s, (Carroll, 1999) and gaining increasing awareness in the 1990s and the new millennium (De Bakker, Groenewegen, & den Hond, 2005). Likewise, reporting on environmental and social matters has been prevalent for several decades with further growth over the past decade. (Deegan, 2002).
Reporting on the CSR activities of a company forms an integral part of this discourse. CSR reporting is a key tool for communication with stakeholders about company CSR activities. As such it forms a central charter for public relations in communicating and creating mutual understanding, managing potential conflicts and to achieve legitimacy (Aldrich & Fiol, 1994, & Grunig, 1989 ).
Communication of a company social impact is important, and disclosing true and relevant information about corporate behavior can have benefits for stakeholders, company and society. Given that societal demands and expectations can be traced all over the world, companies are responding to these demands in a variety of manners (Hooghiemstra, 2000).
The focus of this paper is on examining how two American car companies, General Motors and Ford Motor of the same automotive industry, are addressing CSR reporting issues using their sustainability report.
1.2 Research Objectives
Given the increasing value of CSR and it high consciousness in the car industry, it of important to compare and defined the added value of CSR of individual car companies.Using GM and Ford, the thesis aims to provide a review and a comparison of the influences on the CSR guidelines and reporting standards in both car companies. In addition, it aims to show that reporting standards in both companies could connect and contribute to Global Reporting Initiatives.
The issues of CSR and CSR reporting are becoming important not only at company levels but at the global level as well. Company’s pressures are becoming global and global automotive industries as a whole is facing different market and institutional pressures to be socially responsible and to report on socially responsible practices. By comparative study of GM and Ford, I aim to incorporate the richness of the CSR reporting debate. The comparison of CSR reporting standard of GM and Ford, is interesting from at least two points of view.
First, the question arises as to whether the (GRI), which continues to make inroads as an acceptable standard for global companies, can become a unique model of reporting company’s concept of reporting
Secondly to see if such comparative studies can give an overview of that state of CSR strategies between the GM and Ford which are of the same global automotive industry?
Key words: CSR Reporting, Stakeholder Theory, Global reporting initiatives, Comparative Study.
2. Literature Review
Given the principles of how companies can make use of CSR and which effects CSR has on companies performance indicators reporting, it is important to build up comparative understanding of the subject matter. Given the complexity of CSR, various aspects are highlighted including the emergence of CSR, CSR Reporting, Stakeholders theory, sustainability and GRI. Finally the sustainability reports of both companies are been compared and discussed.
2.1 Corporate Social Responsibility at glance
CSR theories have not yet come up with single and defined principles. The developed principles of CSR are quite oppositional and are controversially discussed in literature. For R Freeman (1984), the term “corporate social responsibility” came in to common use in the late 1960s and early 1970s, after many multinational corporations formed. The term stakeholder, meaning those on whom an organization’s activities have an impact, was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984. Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. Looking at a company view, CSR is basically a description of the role a company plays serving many stakeholders and particular the role companies plays in supporting society
According to D.Woods (1991) corporate social Responsibility is a form of corporate self-regulation integrated into a business model. Beside D.Wood definition, several other authors have come up with their own definition. Most recently, the most cited is Carroll (1979, p.500) who stated that the “social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organizations at a given point of time”. Another definition was introduced by Whetten, Rands, and Godfrey (2001), who defined CSR as “societal expectations of corporate behavior: a behavior that is alleged by a stakeholder to be expected by society or morally required and is therefore justifiably demanded of business”. (Golob, 2006).
Corporate attention to CSR has not been entirely voluntary, many companies awake to it after being surprised by public responses to issues they had not previously thought were part of their business responsibilities. The ongoing aspect of CSR are so disconnected from business as to obscure many of the maximum opportunities for companies to benefit society.( P 80). At the same time, they encourage the thinking of CSR as a rather strategic tool and see CSR as “a source of opportunity, innovation, and competitive advantage” rather than an infringement of a manager’s scope of responsibility. (Porter & Kramer, 2006, p. 80).
According to the Harvard business review (2006), debates about CSR have moved into corporate boardrooms. In2005, 360 different CSR related shareholder resolutions were filled on issues ranging from labor conditions to global warming. Of the 250 largest multinational corporations, 64% published CSR reports in 2005. That number has grown substantially to the extent that nearly every multinational corporation has a whole communication department on CSR issues. This is because sustainable development has been the top priority and also a strong marketing tool for most multinationals. Especially the automotives and energy industry where there exists a negative view from the society as concerns the preservation of the environment (Porter & Kramer, 2006).
According to janjonker and Marco de witte (2006), sustainability under the umbrella of CSR are now part of an emerging global social movement. The general view is that, in the future generating economic value should go hand in hand with the development of social and natural capital. This involves the growing strategic significance of CSR for companies. CSR seems to refer not so much to the qualities of an individual organization but too the qualities of its relationships with the world based on values and identity. This makes it possible to view CSR as part of a process of innovation and social renewal. Thus the key point is the development of competencies and capabilities to connect the business approach with the needs and circumstances of various stakeholders.
2.1.2 CSR Reporting
CSR reporting is a way for companies to provide information for different stakeholders regarding social and environmental issues. The basic form of CSR reporting can be described within the scope of “public-information model” (Grunig& Hunt, 1984, p. 22).
Looking at companies’ social responsibility realm, a society-information approach should communicate “to the society what the company has done to be responsible and should explain lapses into irresponsibility” (Grunig& Hunt, 1984, p. 48).
Hooghiemstra (2000) also offered corporate communication as a model for organizations to use CSR reporting as a strategy to legitimize their activities. Communicators suggest that a society relation is the practice of social responsibility and that social responsibility has become a major point for companies to employ communicators (Grunig& Hunt, 1984, p 48).
There are various types of reports which can be mandatory, solicited or voluntary reports (Van der Laan, 2004; Woodward, Edwards, &Birkin, 1996). Developers of mandatory reporting believe that reporting should be regulated by the state in order to protect the citizens and to ensure the appropriate information is provided (Doane, 2002). Solicited reporting is still on it primary stages but is becoming more popular. The core of solicited reporting is the demand for information issued by a particular stakeholder group (Van der Laan, 2004). This form of reporting develops new, more symmetrical and dialogical forms of communicating, which enable stakeholders to obtain richer, and in many cases better, information (Van der Laan, 2004) and (Woodward et al., 1996). It is an approach based on Grunig and Hunt’s (1984) two-way symmetric model of communication. Underpinning this is the focus on community dialogue and consultation within the values and processes of companies that have a focus on social responsibility (Wood, 1991).
Voluntary reporting is the most recognized form of reporting. The main characteristic of these reports is their voluntary form and contents, which can lead the companies to use the reports to portray their image in a favorable light (Stittle, 2002, p. 349). There is some public pressure to develop CSR policies arising from the failure of voluntary reporting (Ariel Aaronson & Reeves, 2002). These are the drivers for some governments as well as other institutions to introduce different accreditation mechanisms, guidelines and standards for CSR practices and reporting, which do not attempt to mandate corporate social responsibility and CSR reporting, but to find a middle way to hold companies accountable for their actions (Ariel Aaronson & Reeves, 2002; (Hopkins, 2003) and (Stittle, 2002).(Golob, 2006)
2.1.3 Strategic Vs Generic CSR
In the pass years, Porter and Kramer (2002, 2006, 2011) elaborated an enhanced understanding of CSR as “corporate social integration”. (2006, p. 92) Both scholars promote the concept of shared value and hence the formation of “mutual dependence of corporations and society” which creates a balance situation for all involved parties. (p. 84). As it concerns the still rather low productivity of CSR activities, they criticize the idea to pose business and society against each other and point out the missing thought of interdependency. Moreover they add the remark that companies do not integrate CSR according to their individual needs and goals, but rather in a nonspecific, general way. (p. 78). Hence multinational enterprises have become the prime target for activists to be accused and accounted responsible for worldwide environmental and health problems, even though often these facts lay far beyond their area of influence and control. (p. 80). Porter and Kramer (2006) suggest that companies have to stop concentrating on short-term CSR actions and rather create a relation between CSR and corporate strategy. The alignment to business goals could then generate effective value added not just for the society, but also for the company’s long-term competitive position. (p. 83) Therefore the authors divide CSR activities in responsive as well as strategic CSR that are grouped in three classes (figure 2): Generic social issues that are not strongly linked to or influence the company’s success, value chain social impacts that affect the firm’s operational business to a considerable extent and at last social dimensions of competitive context as part of the company’s outer surroundings that affect the fundamental factors of competitiveness. (p. 85). How far the automotive industry fulfils this framework within their individual CSR activities will be discussed.
2.1.4 Prevailing Justification for CSR
Micheal Porter and Mark Kramer (2006), highlighted four prevailing justification of CSR, which include “moral obligation, sustainability, license to operate and reputation”.(P 81)
Moral appeal principle argued that” companies have a duty to be good citizens and to do the right thing” ( p. 81). It is linked with the non-profit CSR business association of the United States. It asks its members to achieve commercial success in ways that reflects ethical values and respect people, communities and the natural environment.CSR approach has a strong link with moral imperative. For example in a situation such as honesty for a company in filing financial statement and operating within the law, moral accounts are easy to understand and applied. (Porter & Kramer, 2006).
Sustainability principle helps to enlightened self-interest, which gives rise to the triple bottom line economics, social, and environmental performance.(P. 82).According to Porter and Kramer (2006),an excellent definition was developed in the 1980s by Norwegian Prime Minister Gro Harlem Brundland which was used by the World Business Council for Sustainable Development:”Meeting the needs of the present without compromising the ability of future generations to meet their own needs”(p.81).It helps companies to operate in ways that guarantee long-term economic performance by avoiding short- term behavior that can be social socially detrimental or environmentally wasteful.
License-to-operate approach derives from the fact that company needs tacit explicit permission from the government, communities and numerous stakeholders to do business.” This approach by contrast, is far more pragmatic”.(P.82).It help to promote good business environment for social issue that matter matters to stakeholders and also fosters constructive dialogue with regulators.”Companies that view CSR as a way to placate pressure groups often finds this approach devolves into a series of short-term defensive reactions- a never-ending public relations palliative with minimal value to society and no strategic for it business” (Porter and Kramer, 2006).
Reputation principles focus more on satisfying it external audience. With such a notion in place, it implies less attention is been place on it internal audience. Companies used the notion of reputation to justify their CSR activities on the bases that, these factors will strengthen the company’s structure, image, improved its brands, bust morale, and even to raise the company stock value. In respective of it positive effect in the field, company still find it difficult to stick on a particular approach which in effect brings in some demerit of such an approach.( Porter & Kramer, 2006)
2.1.5 Stakeholder Theory
Business Ethics management in general follows many guidelines. GRI Guidelines (2010-2011) describes Stakeholders as entities or individuals that can reasonably be expected to be significantly affected by the company’s activities, products, or services and whose actions can reasonably be expected to affect the ability of the company to successfully implement its strategies and achieve its objectives. This comprises of entities or individuals whose rights under the law on international conventions provide them with legitimate claims within the company.
The stakeholder theory to strategic management was first proposed by R. Edward Freeman in 1984.According to Freeman (1984) a stakeholder is “Any group or individual who can affect or is affected by the achievement of the firm objectives” (p.25). It has been widely viewthat Freeman (1984) was the first management author to so clearly identify the strategic importance of groups and individuals beyond not only the company’s stockholders, but also its employees, customers, and suppliers. He even when further to describe local community organizations environmentalists, consumer advocates, governments, special interest groups, and even competitors and the media as legitimate shareholders.( Ronald W. Clement, 2004).
Given that classical notions of a company’s social responsibilities focus on short-term profit making (Friedman, 1970), different views focus on the equivalent responsibilities between business and society, and with a varieties of stakeholders (Freeman, 1984). Stakeholder theories (Freeman, 1984) describe a wide range of groups in the social environment that a company can affect, and that these groups have legitimate claims on the organization due to concepts in agency and property theories.
Stakeholders provide companies with a range of resources they require to conduct their business such as capital, customers, employees, materials and legitimacy (Deegan, 2002). It help creates a mutual obligation where stakeholders provide a “licence to operate” to the company in return for the provision of socially acceptable, or legitimate, actions (Dowling &Pfeffer, 1975; Guthrie & Parker, 1990; Suchman, 1995). It then brings in a form of social contract that allows the company to continue operations (Deegan, 2002).
Friedman (2006) suggested a very simple notion of differentiating the different types of stakeholders by taking into consideration a group of individuals who have classifiable relationships with a company. Friedman (2006) suggests that there is a clear relationship between definitions of what stakeholders and identification of who are the stakeholders. These groupsof stakeholders are the customers, employees, local communities, supplier and distributors and shareholders.In addition other groups and individuals are considered to be stakeholders in the literature of Friedman (2006), which comprises of the media, public, business partners, future generations, past generations, academics, competitors, NGO or activist, stakeholder representative such as trade union, financier other than stockholders, competitors and Government.
2.2 Instruments of CSR Reporting.
Developing a simple global framework of CSR reporting is clearly an important goal, and attempts have been developed to advance on that (Owen, 2003). The Global Reporting Initiative (Hopkins, 2003) and (Owen, 2003), developed in cooperation with the United Nations Environment Program (UNEP), is particularly well established. The objective of GRI, an independent organization based in Amsterdam, is to develop and facilitate globally applicable Sustainability Reporting Guidelines to enable organizations to voluntarily report on their activities in the social, environmental and economic dimensions. The GRI offers a set of reporting principles and structured report content with indicators for these three domains (Owen, 2003, p. 18)
Besides GRI, there are also other international standard and guidelines which are also important in CSR reporting (Hopkins, 2003). Three distinct but complementary categories reinforce CSR reporting (Hopkins, 2003). Firstly we have Codes of Conduct such OECD Guidelines, ILO Declaration which help define standards of corporate behavior. Second is management standards such as SA8000; ISO 14000 which offer frameworks for implementing socially responsible practices by a corporation. Thirdly we have screenings and rankings such as Dow Jones Sustainability Index, which help provide guidelines for responsible investing and comparing companies).
It is interesting to note that Global Reporting Initiative has already included elements of other standards such as ISO 14000, OECD and the Global Sullivan Principles in its reporting guidelines (Hopkins, 2003). This development indicates the desire to provide a globally acceptable uniform standard of reporting. All this will be discussed in chapter 3 where the various sustainability reports of Ford and GM will be analyzed then compared with each other.
2.2.1 Sustainability Reporting and GRI Reporting.
Sustainability reporting refers to the practice of measuring, disclosing, and being accountable to internal and external stakeholders for company performance towards the goal of sustainable development (GRI, 2000-2011, P.3). Sustainability reporting is closely associated with others used to describe reporting on economic, environmental, and social impacts.
A SR outline a balanced and reasonable representation of the sustainability performance of a reporting company – including both merit and demerit contributions. (GRI, 2011)
Sustainability reports based on the GRI Reporting Framework disclose outcomes and results that occurred within the reporting period in the context of the company’s commitments, strategy, and management approach. In certain cases, reports can be used for the following purpose among others. Firstly Benchmarking by assessing sustainability performance with respect to laws, norms, codes, performance standards, and voluntary initiatives. Secondly demonstrating how a company influences and is influenced by expectations about sustainable development. Thirdly comparing performance within a company and between different companies over time. (GRI, 2000-2012).
GRI Reporting is an acceptable framework for reporting on acompany’s economic, environmental, and social performance. It was developed for use by companies of any size, sector, or location. It takes into account the practical considerations faced by a diverse range of companies from small enterprises to those with extensive and geographically dispersed operations. The GRI Reporting Framework contains general and sector specific content that has been agreed by a wide range of stakeholders around the world to be generally applicable for reporting a company’s sustainability performance. (GRI, 2000-2012, P.3). It is important to know that the GRI Reporting framework documents are designed using a process that seeks consensus through dialogue between stakeholders from business, the investor, community, labor, civil society, accounting andacademia.(P.3).
SR is made up of standard disclosure which is always part of a standard disclosure. Standard disclosure provides information that is of important and material to most companies and of interest to their stakeholders.
Standard disclosure is made up of three types which include Strategy and Profile, Management Approach and Performance Indicators. (GRI, 2012).
Given the various types of standard disclosures, the main purpose of this thesis will focus on the comparable performance indicators used by both Ford and GM. Performance indicator draw out comparable information on the economic, environmental, and social performance of a company.
The economic dimension of sustainability concerns the company effects on the economic conditions of its stakeholders and on economic systems at local, national,and global levels. Economic Indicators provide the flow of capital among the various stakeholders and help to maintain economic impacts of the company throughout society.Financial performance is important in understanding a company and its sustainability practices. In most cases, most of the financial information is normally reported in the financial account. What is often reported less, and is frequently desired by users of sustainability reports, is the company’s contribution to the sustainability of a larger economic system. (GRI, 2000-2012)
The environmental dimension of SR concerns a company’s impacts on living and non-living natural systems, including ecosystems, land, air, andwater. Environmental Indicators cover performance related to inputs such as material, energy, water andoutputs such as emissions, effluents, waste. In addition, they cover performance related to biodiversity,environmental compliance, and other relevant information such as environmental expenditure and the effects of products and services. (GRI, 2000-2012)
The social indicators of sustainability concerns the effects a company has on the social plans within which it operates. The GRI Social Performance Indicators identify key performance aspects surrounding labor practices, human rights, society, and product responsibility. Companies broad goals regarding performance relevant to the labor aspects, indicating their closeness tothe internationally recognized universal standards. Companies specific indicators in addition to the GRI performance indicators to demonstrate the results of performance against goals. (GRI, 2000-2011).
The theoretical background and the context serve as an important explanatory variable which build the foundation for the comparative analysis of chapter 4. Comparative study is often used in explorative research to detect and explain the differences between (and similarities among) the objects of research. In this paper, an informative comparison is been analyst, contextual explanations of CSR reporting in Ford and GM. The aim is to determine how the differences in CSR reporting can be explained and whether any similarities can be identified. Thus, the next section of the paper first explores the context for analysis, the comparable performance indicators (Environment, Economic and Social) and the state of corporate social responsibility in both companies. Hence, the findings of comparison are presented.
3.1 Ford Company Review.
Founded in June 16, 1903 by Henry Ford, Ford Motor Company is an American multinational automaker with it headquartered in Dearborn, Michigan, a suburb of Detroit. Ford sells automobiles and light commercial vehicles under the Ford brand and luxury cars under the Lincoln brand.Ford Motor Company is one of the leading companies in the global automotive industry. Ford, along with its subsidiaries and affiliates, offers cars, trucks, SUVs and many other products and services to automotive consumers across six continents (North America, Europe, Asia pacific, Ford of Japan, South America, African and Middle East). Ford, Lincoln and Mercury are the wholly-owned brands of the company. It operates 41 distribution centers and warehouses, 57 engineering, research and development facilities, 106 sales offices and 73 manufacturing facilities worldwide. The company also engages in the business line of car rental and leasing activities and car financing and other related financing activities. (GlobalData, May-2012)
For past years, Ford also produced trucks, tractors and automotive items. Ford motor is listed on the New York Stock Exchange and is controlled by the Ford family, although they have limited ownership. (Joann Muller)
Ford is the second-largest U.S. based automaker and the fifth-largest in the world based on 2010 vehicle sales. (Berthel Schmitt, 2011). At the end of 2010, Ford was the fifth largest automaker in Europe. (ACEA, 2011) Ford is the eighth-ranked overall American-based company in the 2010 Fortune 500 list, based on global revenues in 2009 of $118.3 billion. In 2008, Ford produced 5.532 million automobiles and employed about 213,000 employees at around 90 plants and facilities worldwide. (Ford 2008 Annual Report)
Going by the front page of Ford sustainability report (2010/2011), is the nonfinancial report of Ford Motor which outline the company vision for CSR reporting which is based on organizational learning, the company values which reflects its economic, environmental and social performance. Ford focus it sustainability issues mostly to it stakeholders and to report users. Looking at the letter from Ford Executive Officer (William Clay Ford, 2011) which state that ‘The mobility challenge and other global challenges we face as a society and an industry present us with an incredible opportunity to add value for our stakeholders and shareholders. Companies that address these issues with solutions that customers want will gain asignificant competitive advantage’. (Ford SR, 2011 p. 4). With such an effort, ford had made a lot of progress in areas related to its key stakeholders. Examples include announcing plans to add 7,000 new hourly and salaried jobs in the United States between2011 and 2012, paid profit sharing to eligible members and awarded bonuses to U.S. employees, updating ford trend of steady. Beside it activities, ford also supported hundreds of companies with charitable grants totaling $29 million and provided more than 112,000 hours of employee and retiree community service work the equivalent of $2.25 million in in-kind corporate contributions. (Ford SR, 2011 p.394).
Ford operations impact a broad range of stakeholders. Looking at ford activities, the company believes in maintaining closed and open relationships with its employees, customers, suppliers, dealers, investors and society which plays an important role in its ability to meet the company goals. (Ford SR, 2011 p.393). Ford always keeps positive relationships with it employees and business partners which help to improved it efficiencies, cost and quality, hence new innovations are been develop and deliver to its customers. By embarking on direct communication with its customers, dealers and other stakeholders, helps ford to understand and deliver the right products to its customers. Ford strong relationships with it suppliers enable ford to work together to implement environmental and human rights initiatives that are critical to a sustainable business. ( Ford SR, 2011).
Ford materiality analysis confirms that Ford relationships with it stakeholders remain an important issue for both the Company and its stakeholders. Generally, the analysis identified the issues of employee relationships, supplier relationships, dealer relationships, and diversity which help ford to have a closer relationship with it stakeholders. (Ford SR, 2011 p.393).
Ford CEO Allen R. Mulally tries to implement strategies that continue to make progress in other important areas which is of high importance to its customers. Looking at the company record since 2000, ford manufacturing facilities worldwide have reduced overall energy use by 40 percent, decreased CO2emissions by 49 percent and cut water use by 62 percent. During 2010 ford updated its water strategy, in recognition of the importance of freshwater to communities and to its own operations and in recognition of the interconnections between the availability and quality of water and other issues like climate change.Ford Motor also promotes sustainable business practices not only in the company global operations, butthroughout the company supply chain. CEO Mulally letter illustrate how the company is leading an industry-wide supply chain approach to ensure that all components used in its products are manufactured under conditions that demonstrate respect for the people who make them. With high respect for it stakeholders, Ford is also working with suppliers to promote environmentally sustainable practices and to better understand effects in it supply chain. In 2008 Ford Motor joined the United Nations Global Compact, which endorses a framework of principles in the areas of human rights, labor and the environment.In communities around the world, Ford philanthropic organization, Ford Motor Company Fund and Community Services, supports nonprofit organizations in three major areas: innovation and education, community development and legacy, and driver safety education. Also, Ford employees around the world are actively engaged in making a positive difference in their communities. Ford Volunteer Corps, which was established in 2005, encourages salaried employees to take two work days per year to serve as volunteers. In 2010 some 27,000 Ford employees and retirees in 41 countries provided more than 112,000 hours of work on more than1,100 community service projects.In 2011 FM was honored to be recognized as one of the world’s most ethical companies for the second year in a row by the Ethisphere Institute, a leading business ethics think tank. This award is based on an extensive review of companies’ social responsibility efforts, corporate governanceand business practices. (Ford CEO Allan R. 2011 SR p.7)
Thus summarizing the stakeholders review, FM shows a strong commitment to a wide range of stakeholders. Though at first sight especially employee, customers, dealers, supplier, communities and the environment are targeted on the homepage, the annual as well as SR underline the importance of society which includes: government agencies, NGOs and Academia for FM. Hence namely customers, shareholders, the environment and employees are primary stakeholders. (Ford SR, 2010/2011).
3.1.3 CSR Reporting strategy and performance Indicators.
As a global leader in the automobile industry, FM is confronted with many challenges. The corporation is not only committed to satisfy stakeholders or employees with a rewarding salary, but FM is more convinced than ever that it long-term success depends on how the company addresses it environmental, economic and social issues. Most importance’s of the issuesthat the company address include: climate change, human right, community investments, safety, energy security, congestion, noise and innovation use of renewable resources and material. The company believes that innovation sustainability thinking represents one key in delivering great product, a strong business and a better society.
With the objectives to become a sustainable company, FM is confronted with a demanding and ambitious goals and it therefore in the company’s material needs to anticipate and respond to these need which can only achieved with high willingness, focus and implementation. (www.csrglobe.com/ford). Hence to come closer to this target the FM has launched various CSR initiatives, programs and partnerships tailored to stakeholders and different interest groups in the fields of environment, climate change, human right, supply chain, mobility, economy, society, communities.
Focusing first on the environment, ford had made significant progress on the environmental aspects of it product and Operations.The Corporation improved and expanded it corporate standard and requirements for sustainable materials, hence improving it in-vehicle air quality. Ford had expanded the use of recycled and renewable materials across ford cars lines and developing new applications for sustainable materials. With it high ability to satisfy it stakeholders, the corporation is working on a project to enhanced vehicles produced in North America with soy foam seating.Ford had introduced packaging guidelines for the transport of parts and materials used in Ford vehicles. With guidelines, the company supplier provide packaging to support corporate sustainability goals by seeking a neutral or positive environmental footprint through zero waste to landfill and the use of 100 percent recycled, renewable or recyclable materials.Looking at the company achievement in environmental aspects, the corporation received the Energy Star Sustained Excellence Award from the U.S. Environmental Protection Agency and the U.S. Department of Energy. This award recognizes Ford’s continued leadership in and commitment to protecting the environment through energy efficiency. (Ford SR, 2011 p.325)
FM has an environmental policy and environmental directives that apply to it operations Worldwide. All Ford manufacturing facilities and product development functions are certified to ISO 14001, the leading global standard for managing environmental issues.These commitments put the corporation most significant potential environmental impacts under one comprehensive environmental management system.The company manufacturing department sets environmental targets annually for all its facilities in relation with the company past performance, future regulation trends, environmental technology advances, financial conditions. In 2007, FM implemented the Global Emissions Manager (GEM) database, which provides a globally consistent approach for measuring and monitoring environmental data. With GEM, FM can track its efforts to reduce water consumption, energy use, carbon dioxide emissions and the amount of waste sent to landfill. The information that GEM provides and the level of analysis it allows also helps FM set more effective environmental management targets and developed more specific strategies for improving environmental performance. (Ford SR, 2011)
To conclude FM also embark on environmental case study such as the Michigan Assemble Plant which reflect a symbol of ford’s transformation. The transformation of the plant embodies the larger transformation of its entire operations. It outlines ford focus on meeting increasing customer demand for fuel efficient and advanced green vehicles, reflects the best of ford green and flexible manufacturing technologies and finally highlights how ford as a company can contribute to economic growth by advancing sustainable products and manufacturing technologies.
Just like in other automotive industry, FM treat the issue of climate change with high importance to reduce the potential for environmental, economic and social harm from climate change.The company have a comprehensive, science-based strategy to reduce green house gas emissions from it products and processes while working cooperatively with the public and private sectors. Beside closed cooperation with customers, FM had made major strides in implementing the corporation strategy by providing outstanding fuel efficiency in products that customers want and reducing green house gas emissions from its operations. (Ford SR, 2011).FM climate change initiatives are to stabilize CO2 concentrations in the atmosphere to a rate which is generally accepted to avoid the most serious effects of climate change. The company stabilization mechanism focus on refreshed vehicle with high quality for fuel economy, reducing green house gas emissions enough to contribute to climate stabilization and reducing CO2 emissions to 30 percent by 2025 on a per-vehicle basis.(Ford SR, 2011).
More to FM stabilization project are advanced technological cars with high value, attractive models that are smaller, lighter and more fuel efficient which encourage customers to shift their purchasing behavior.(See Appendix 1). FM also continues to invest in energy-efficiency improvements worldwide where in 2010, fm explored carbon emissions in it supply chain through multi-stakeholder projects. Given the advancement in climate change, FM is working on future actions ahead for it stakeholders which include reducing CO2 emission from it 2010 model year U.S.and European new vehicles by 10.5 percent and 8.1 percent as compared to the 2006 model year, reducing CO2 emission on it global operations and announcing three more engines with EcoBoostTM fuel-saving technology. (Ford SR, 2011).
With such strategies in place to reduce emission, the company shows itself to have a closer relationship with it stakeholders.
Ford considers the company suppliers as allies in achieving success in the marketplace and to meet its CSR goals. The company maintain closer relationships with its suppliers and seek alignment with them on sustainability-related issues such as greenhouse gas emissions and human rights.(Ford AR, 2010/2011).
Going by the company code of conduct act, the basis of ford work with suppliers is the Ford Code of Basic Working Conditions which applies to all it supply chain operation worldwide.With such relationship with it supplier, both partners have put a management systems in place to mitigate potential risks, ensure continuity of supply and improve the overall sustainability of the complex global automotive supply chain. Ford objectives is to leverage its supply chain to make a positive effects in the global market.The company came up with a three-pronged principles to engagement with it suppliers on CSR reporting matters which includes, building capability at individual supplier facilities, engagement with strategic supplier and collaborating with peers in the automotive industry.(Ford SR, 2010/2011 p.157)
To conclude it all, ford have made an advancement in it human right responsibility accomplishment in the supply chain where ford continued to work with its strategic suppliers to ensure that they implement robust Codes of Conduct and supporting management systems.Independently, Ford trained suppliers in Romania on systemic solutions to working conditions challenges and assessed 136 supplier factories around the world for compliance with Ford and legal requirements. Ford global totals now exceed 1,655 suppliers trained and 751 suppliers assessed. (Ford SR, 2010/2011) Ford was ranked first in the human right category in CR magazine’s 100 best corporate citizen list (see appendix, 1).
Community and Mobility
Ford has been supporting community efforts since its founding more than 100 years ago. Besides donating money in community’s projects, ford build partnerships and work with the communities to address the difficult challenges facing the society. Ford communities activities includes helping feed hungry people, providing mentors in classrooms and teaching teenagers to drive more safely.Ford consider the community to be ‘a good neighbor – in good times and in bad’.(Ford SR, 2010/2011 p.422)
With the slogan ‘a good neighbor in good times and in bad’, ford considers CSR reporting at the heart of its operations. FM have thoroughly linked its Company’s economic health to the environmental health of its activities and to the broader social health of the communities in which the company operate.In the past years, FM have taken steps to develop a more integrated approach to managing the different dimensions of its community involvement. Ford objectives is to closely connect its traditional community relations programs, community effect assessment processes and human rights efforts so that both force can work together to reflect the company commitment to the society. Over time, FM have integrate these efforts with development of new products and services to meet the unique mobility needs of communities in emerging markets which will increase the company efficiencies, hence maximize its effect and effectiveness.With high regard of CBWC as a formal policy letter reinforced the company is able to take action which is outside the wall of it operational activities which help the company in addressing several key community issues and evaluate engagement with members of the local community.(Ford Annual Report, 2010/2011).
Projecting the future, FM aimed at make mobility affordable in every sense of the word economically, environmentally and socially in congested urban locations as well as remote regions. Through partnerships and pilot projects, FM is looking beyond the vehicle manufactured to explore new models of mobility that integrate a variety of transportation options. These new models will demonstrate how Ford can address unmet social needs while responding to the realities of mobility in the 21st century.While the company is poised engaged in the expanding markets, FM also recognized the changes ahead of it operation such as mobility challenges-CO2and other emissions to congestion(Ford SR, 2010/2011)
Finally, in addition to the financial contributions made by Ford and Ford Motor Company Fund and community services to hundreds of organizations worldwide, thousands of Ford employees and retirees volunteered to help build stronger communities around the world in 2010.Volunteerism has been an integral part of Ford Motor Company since its creation in 1903. (See appendix 2). Today, ford help build communities by leveraging the volunteer muscle of Ford employees and retirees around the world. (Ford AR, 2010/2011)
Ford Motor Company’s impact on the U.S. and global economies is broad and diverse. Ford success as a company directly affects millions of people,including employees, retirees, dealers, investors and suppliers. The company activities also haveindirect economic impact on the hundreds of communities in which weoperate worldwide. (Ford SR, 2010/2011)
To sustain the Company, meet its responsibilities and contribute in tackling global CSRissues, Ford has continue to implement restructured plan by aligning the company worldwide operationsto focus on certain key priorities. Firstly by aggressively restructure to operate profitably at the current demand and changing model mix, accelerate the development of new products to customers, financing new plan and improve the company balance sheet and finally working together effectively as one team. (Ford AR, 2010/2011)
Looking that the company CSR report in 2010, as global economy continued to recover from a severe recession and challengingeconomic conditions in major markets. Ford has continued to improved its financial conditionsignificantly by building on the momentum gained in 2009 CSR report. Ford achieved full-year profitability in2010, with each business segment reporting better results than in 2009. The company continues tointroduce new products that are well received in the marketplace and also increase productivityand reduce key costs to operate even more efficiently. (Ford SR, 2010/2011 p.261)
To conclude, Ford made a major financial and product achievement in 2010 where the company exceeded its profitability expectations with an $8.3 billion pre-tax profit and generated $4.4 billion in automotive operating-related cash flow. Ford also received a number of prestigious vehicle awards in 2010 and 2011 where the all new Ford Explorer was named “Truck of the Year” at the North American International Auto Show, the Ford Focus was named the official car of the Consumer Electronics Show, and the Ford Figo was awarded Indian Car of the Year 2011 by a leading jury of automobile journalists. (corporate.Ford.com, 2011)
3.2 General Motors Company Review
Founded in September 16, 1908 by William C. Durant, General Motors Company commonly known as GMis an American multinational automotive corporation headquartered in Detroit, Michigan, and the world’s largest automaker, by vehicle unit sales, in 2011. (Galligan Kathleen, 2012)
GM designs, builds and sells cars, trucks and automobile parts worldwide.GM also provides automotive financing services through General Motors Financial Company. It operates in four automotive segments: GM North America , GM Europe , GM International Operations and GM South America . GM’s total worldwide vehicle sales were nine million during the year ended December 31, 2011. GM develops, manufactures and markets its vehicles under the brands, such as Buick, Cadillac, Chevrolet and GMC for its customers in North America. GM for its customers outside North America develops, manufactures and markets its vehicles under the brands, such as Buick Chevrolet, GMC, Opel, Cadillac, Daewoo, Holden and Vauxhall.GM markets its vehicles worldwide primarily through a network of independent authorized retail dealers, such outlets include distributors, dealers and authorized sales, service and parts outlets. The Company enters into a contract with each authorized dealer agreeing to sell to the dealer one or more specified product lines at wholesale prices and granting the dealer the right to sell those vehicles to retail customers from an approved location. Authorized dealers offer parts, accessories, service and repairs for GM vehicles in the product lines that they sell using GM parts and accessories. Its dealers are authorized to service GM vehicles under its limited warranty program and those repairs are to be made only with GM parts.GM employs approximately 202,000 people around the world.(Thomson Reuters, 2012)
The traditional concept of a stakeholder is “any group or individual who can affect or is affected by the achievement of the firm’s objectives” (Freeman 1984).Looking at the front page of GM sustainability report, is a word from Daniel F. Akerson (GM CEO) which state ‘our confidence is based on a new business model – one that very purposefully integrates sustainability into our operations and products'(see appendix,3). Such a statement shows how the GM is committed to its stakeholder activities within and outside the company.GM recognized that sustainability feeds its bottom line and that sustaining a profitable business the company ultimate responsibility. Profits GM made does not only benefit it shareholders but also its stakeholders where profit enable reinvestmentin more fuel-efficient technologies, improved vehicle safety, creating more jobs for the communities in which it operate and live.GM business model also reveals that the company future projects are aligned with its societal needs such as energy alternatives and advanced technologies that help reduce dependency on petroleum, improved fuel efficiency that reduces CO2emissions, as well as bold thinking that can transform personal mobility in the 21st century. GM success as a business is dependent in part upon offering vehicles and services to solved challenges while meeting the needs of its customers. (GM SR, 2010/2011)
To conclude, GM recognized that progress and change require commitment. On this front, the company have a great track record to build upon where GM goals was to have half of its global manufacturing operations landfill-free by the end of 2010 by recycling, reusing or converting to energy all wastes from its dailyoperations. GM surpassed this goal and ended 2010 with more than half of its plants landfill-free and today by saying GM is “world’s best” means GM vehiclesare responsive to the needs of its customers and responsible to the realities of the environment in which its operate. (GM SR, 2010/2011).
3.2.2. CSR Strategies and Performance Indicators
GM recognized that is only by acting responsibly that it can continue to be economically, socially and environmentally successful. GM as a company has a long history of supporting the communities’ services. The company CSR activities are been focus mostly on education, public health, community, social investment, environment, safety and human right. Most of GM CSR activities are been implemented on the company own project and foundation which is not for profit making. GM put in place the global sullivan approach as the foundation of it CSR strategies and also putting in place the global reporting initiative as a tool in measuring it performance effort. (www.csrglobe.com/generalmotors)
Because transparency and accountability are fundamental principles of GM code of conduct, the company report it CSR activities within the framework of the GRI guidelines.
With such initiatives in place,GM has developed and implements itspolicies, procedures, training and internal reporting structures to ensure commitment throughout thecompany operations. GMbelieves the application of these guidelines will achieve greater tolerance and better understanding among peoples, andadvance the culture of peace. Some of the company code of conduct includes supporting universal human rights and, particularly, those of its employees, the communities within which it’s operate, and parties with whom its do business with. Secondly working with governments and communities to improve the quality of life in those communities such as educational, cultural, economic and social wellbeing and alsoseeking to provide training and opportunities for workers from disadvantaged backgrounds. (GM SR, 2010/2011)
As a responsible corporate citizen, GM has been active in protecting human health, natural resources and the global environment. These actions reach further than compliance with the law to encompass the integration of sound environmental practices in its worldwide operations. Thecompany environmental principles provide guidance to it personnel in the conduct of their daily business practices. Such code of conduct state that GM is committed in reducing waste and pollutants, conserving resources and recycling materials at every stage of it product life cycle, participate actively in educating the public regarding environmental conservation, pursue vigorously the development and implementation of technologies for minimizing pollutant emissions, working with all governmental entities for the development of technically sound and financially responsible environmental laws and regulations and assess the effect of its plants and products on the environment and the communities in which its operate with a goal of continuous improvement. (GM SR, 2010/2012)
The company implementation of Environmental Principles is facilitated by a set of Environmental Performance Criteria (EPC) that is applied to it manufacturing facilities on a global basis. GM performance criteria address common environmental issues that affect its facilities worldwide and help to develop common strategies that supplement applicable legal requirements by setting separate baseline environmental management and performance practices. As a result, GM work to ensure that a base level of environmental performance is achieved, regardless of where it operation is taking place. The management of air emissions commonly associated with vehicle painting operations provides a good example of EPC application. The EPC establishes a worldwide baseline standard for all new assembly operations with regard to paint shop emissions and minimum technology requirements, regardless of whether or not the country in which the paint shop is operated has adopted specific air emissions requirements.All of GM manufacturing facilities and a number of its nonmanufacturing sites around the world have implemented its Environmental Management System (EMS), which combines elements of the environmental management standard International Organization for Standardization (IOS) 14001 and elements that are specific to its operations. The IOS 14001 EMS represents the core set of standard used by organizations for designing and implementing an effective environmental management system. This overarching management system is designed to drive a continuous performance improvement cycle in line with legal requirements, site-specific objectives and targets, and corporate and sectorpolicies and strategies. GM operations in the U.S., Canada and Mexico have integrated their EMS within the GM Global Manufacturing System and Business Plan Deployment process, resulting in an EMS with attributes well beyond those specified in ISO 14001. These operations self-declare their conformance to the ISO 14001 standard. A robust internal self-certification process has been established, which provides risk-based auditing to ensure continuous improvement in environmental performance. New manufacturing operations are required to implement and certify their EMS within 24 months of the start of production or the date of acquisition. By maintaining a common environmental management system, GM can measure its environmental performance and share knowledge, processes and technologies within GM to plan and target improvements across all of its manufacturing facilities. As a result of GM commitment to environmental indicators, GM has improved its overall environmental performance. (GM SR, 2010/2011)
GM have been active in the communities services by engaging in philanthropic and communities services. GM has maintain its leadership position as a valued responsible corporate citizen by enhancing the quality of life in the communities where its operate.Reinvestment in communities and causes that benefit the greater good are an intrinsic part of GM heritage and future. From grassroots initiatives in countries around the globe to support from the GM Foundation in the U.S., from volunteer projects by individual employees to ambitious cause marketing programs by GM brands, a portion of GM energy, talents and resources are shared beyond the walls of the GM operation globally.(Appendix 4) In general, GM focus on supporting, education, health and human services, environment and energy, and community development initiatives. (csrglobe, GM SR, 2010/2011).
The company work to create society awareness of the need to balance economic, social and environmental issues.With an emphasis on health and human services, the GM Foundation is a major contributor to the American Heart Association, the American Red Cross and SafeKidsUSA, among its many other charitable giving programs. GM and the GM Foundation Have contributed more than $1 million to the American Heart Association and have focused on research and prevention of heart disease, cancer and diabetes. The GM Foundation also recognizes its responsibility to ensure the well-being of its consumers by investing in programs such as Safe Kids USA that promote research, innovation and education in increased
passenger safety. (GM SR, 2010-2011).
GM consider its suppliers to be critical business partners. Suppliers are an important part of GM commitment to corporate responsibility. GM has a strict “zero tolerance” policy against the use of child labor, abusive treatment of employees or corrupt business practice in the supply of goods and services to the company. (GM SR, 2010/2011)
Additionally, GM support the Global Sullivan Principles, which are aspirational guidelines for responsible business conduct, to recognized he important of it workers and the communities in which it operate.GM supply chain policy state that ”we build where we sell and buy where webuild”. This practice makes commercial sense both to GM and its communities operations. Such localized supply chain provide commercial, environment and communities benefits to the GM and the society.Face challenges to implement this policy, GM is committed to working through these challenges, given the considerable benefits of is local supply chain. GM is involved in a number of programs around the world to enhance is supply chain sustainability in terms of environmental and economic performance. Example can be seen in China where GM continues to promote the Green Supply Chain Initiative. With this initiative, GM aimed at improving the performance of its joint ventures’ suppliers in support of the Chinese government’s goals of promoting energy efficiency and sustainable development. (GM SR, 2010/2011).
4. Comparison of CSR Reporting Indicators
By comparing Ford and GM one can see that there are some measuring and monitoring variations in their CSR reporting strategies and indicators. There are also, however, some similarities. Both automobile companies are American car manufacturing company with high regulatory reporting system under the GRI guidelines. Both companies have a high interest for the communities where they operate and treating environmental issue with high priority. Ford Motor engages in CSR reporting more actively than is the case with GM, an understandable difference since GM produces it first sustainability report in 2010. In both company the impact of CSR activities on stakeholder is been measured and monitored by both external and internal auditors. The effect of CSR initiatives on Ford as a company in been measured and monitored through key indicators such as investors, public attitude, trust, customer survey and cost reduction. However, the impact of CSR reporting for GM as a company is been measured and monitored by global Sullivan principle which is the foundation of GM CSR reporting initiatives which also measured their performance indicators within this principles using the GRI guidelines.
With both companies working on the positive effects on CSR reporting activities and indicators which are of similar direction with environmental issues. FM has been working to integrate environmental and social consideration into the company’s worldwide operations where the FM is convinced that innovative sustainability thinking represents one key to delivering great product, a strong business and a better world.
FM carries out it CSR reporting programmes in partnership with not-for-profit organizations, activist, communities and business partners. Education, community development and environmental safety project are among the major CSR engagement areas for FM. For GM, it CSR reporting indicators will project the company economic success which shows how the company carries out its activities in a responsible manner.GM CSR reporting indicators focuses on the reduction of risk and capturing and creating values to its stakeholders
If social reporting is a corporate communication activity to legitimise an automotive industry action and to build reputation with its stakeholders, community and environment, the question of how automotive industry know what to report arises. A comparison of the CSR reporting activities and of Ford and GM indicates that Ford are most interested in climate change, human right, mobility, company product and corporate positioning whereas GM most interested in safety, social investment, public health, education and the company strategy which are the most important themes of their CSR reporting strategies.
Finally, this strategy is the legacy of the more capitalist oriented market economies in America automotives industry. Their similar priorities revealed in their sustainability report, shows no significant differences in expectations of their CSR reporting activities and indicators be it’s socially, economically and environmentally.
5. Discussions and Conclusion
Given the increasing expectation of transparency and accountability in the automotive industry, company’s notions about adopting CSR initiatives and CSR reporting indictors to meet stakeholder needs and expectations are complex. Achieving these needs and expectation evolved a range of environmental and social standard, code and guidelines. Social and environmental expectations are also similar within the automotive industry as the comparison of Ford and GM CSR initiative and indicators has shown. In addition, other industry put in different if not similar approaches in addressing CSR issues within their company. Given the challenges companies face from activists and NGOs, creating issues for most company to address the communities and societal needs where there operate. Example labour and environmental issues such as CO2emmission problem and community project and funding.
From GM and Ford perspectives, it seems to be more important to increase CSR reporting strategy in both companies, to advance the quality of performance indicators reported and to increase the important of indicators by stakeholders. This can only be done with the joint effort of the, governments, employee, dealers, community, supplier and different stakeholders. Here, we see the important role of CSR communicators on company to understand different challenges and demands posed by different stakeholders and thus develop alternative perspectives to increase the transparency and information richness of CSR reporting indicators (Grunig, 2006) and (L’Etang, 1994). With high importance to environmental, social and its stakeholder’s initiatives, the CSR reporting indicators of both GM and Ford are connected, contributed and reported within the frame work of GRI guidelines.Order Now