Business Sustainability — Case of Automobile industry

Introduction

Turker, Toker and Altuntas (2013) stated that the impact of technology, massive resource utilization and unethical human behaviour has created a sense of deception as well as significant depletion of natural resources. The holding of true business information and exploitation of resources has resulted in social imbalances and rise concerned for the sustainability of the natural resource.

Zaccai (2012) added that the sustainability involves three important domains which are avoiding the exploitation of natural resources, social justice and fairness in the community and minimum damage to the biosphere.

The objective of sustainability is to promote responsibility for resources so that future generation can meet their resource needs. The concerns and issues in automobile industry such as reduce emissions, tax lobbying, safety of passengers and alternative fuel vehicles have amplified business challenges (Jennings, 2014).

The aim of this essay is to examine business issues, ethical concerns and sustainability challenges faced by the automobile industry. The number of problems examines such as deceptive approaches (emission scandals), exploitation of the resources and putting profitability first (resource cost and damage to the biosphere), products recalls, regulation and compliance for emission target are a problem of the automobile industry.

Module Overview — Reflective Journal

The module has helped to understand the environment issues, sustainable product and social responsibility of the organisation. The traditional perspective of organisation which emphasised on profitability has changed and new outlook which environment, human and earth have integrated into organisation framework (Baumgartner and Korhonen, 2010).

Christen and Schmidt (2012) supported that there were a number of themes, concepts and models were studied to understand the need of sustainability viewpoint of companies. The concept such as the relation of resource cost and return through ‘industrial symbioses helped to understand social costs associated with company practices. The need for an efficient system to minimise the resource and energy utilization result in a balance of profitability and externalities (Dincer, Midilli and Kucuk, 2014).

Moreover, various business issues such as the impact of cleaner production, life cycle assessment and eco-efficiency was analysed and evaluated to develop a perspective which contributes towards the minimization of environment cost and promotes sustainable organisation practices. The internationalisation of externalities’ and meeting the targets of emission was elaborated through ‘least cost theorem’ as well as ‘industrial ecology system’ (Boons and Howard-Grenville, 2009; Li et al., 2012).

The concept of corporate social responsibility (CSR) provided a foundation to understand the need for the self-regulated sustainable business practices through managing domains of the economic, ethical and social role of the organisation. The need for various stakeholders was well elaborated using freeman stakeholders model which highlight the role of the organisation towards the society (Preuss, 2013).

Triple bottom line model enabled the understanding of the social responsibility and environment integration to encourage sustainable development and manage the profitability and cost for companies. The emergence of the corporate scandals and deceptive business communications has raised ethical issues and corporate governance issues (Guha and Alier, 2013).

The concepts of corporate governance and business ethical behaviour in the module have helped to understand the various stakeholder needs in terms of increased reliability of business reporting and transparency of the organisation system (Henriques and Richardson, 2013). The integration of theoretical perspective, case studies and real life examples has helped to understand the economic, social and ethical perspective of the organisation and how they contribute towards the sustainable business practices of companies (Tricker, 2015).

Sustainability, Ethics and Business Issues – Automobile industry

Sustainable Business development

Thiele (2013) described that sustainability is concerned with human cultural and economic actions which result in rapid degradation of the natural resources. Sustainable development involves meeting the need of the present generation without compromising the resource need of future generations. The two important domains of sustainability are inter-organisational (current and future generation need) and inter-organisational (implication of current generation’s needs) factors (Welford, 2013).

The sustainable business practices involve stakeholder satisfaction across the value chain. The automobile industry is surrounded with scandals with massive product recall, emission problems and leadership involves in tax lobbying practice in the UK (Henisz, 2014).

According to Elkington (1977), Triple bottom line (TBL) has extended beyond the tradition measure of return on investment, profits and shareholders. TBL has included the social and environment dimensions based on the three interrelated dimension, which are plant, profit and people. TBL allows the organisation to evaluate their environment and social performance and encourage economic development growth in sustain manner. For example, Toyota promotes sustainability through making products, which customers can afford, as well as safe for people and friendly to the environment.

Henriques and Richardson (2013) explained that Toyota emphasis on its products quality so that it has low level of CO2 emissions to minimise environment impact along with make local decision to encourage sustainable communities.

TBL allows the companies to measure their social and environment practices and action affects the people and planet. TBL measure the social and environment performance overtime and thus including the externalities cost to the business. For example, ford offers people fuel efficient cars as well as produce seats for cars from the soy farms. The wastage from the farms used in the production of door panels. Honda encourages the local production of its vehicles to ensure the sustainable economic development for local communities (Carroll and Buchholtz, 2014).

Schoenherr (2012) explained that the cleaner production and eco-efficiency are two concepts, which are integrated through applying strategy that minimise the impact on the environment through the whole value chain. For example, Japanese’s car manufacturers are not focused on creating hybrid cars but also producing vehicle from recycle materials. This allows the companies to protect environment and preserve resources for generations to come.

The triple bottom line (TBL) helps the business to think beyond traditional profitability perspective and extend the business goals to social and environment value. The social responsibility involves better working condition and contribution towards the society. Cleaner production and Eco-efficiency involves the continuous application of integrated and cleaner environmental practices to production processes for green product. The objective of cleaner production is to achieve eco-efficiency and effectiveness as well as reduce risk to human and environment (Alves and Medeiros, 2015).

Henriques and Richardson (2013) discussed that economical responsibility highlights value addition for the shareholders and strength market position of the company (better product, jobs and taxes). The automobile industry has failed to deliver a quality product and make a positive contribution to the society and environment. For example, consumers are looking for affordable cars in developing countries and ford has introduced car model in India to meet the demand of customers.

The ford sustainable shift in the emerging markets such as India meets the need of customer, encourage the economic development at regional level through fuel-efficient vehicles. TBL integrates the natural capital and human capital value to the business process rather sole focus on the profitability (Jennings, 2014).

Elkington (1997) further suggested that economic lines impact involves growth of economy and business and giving back to society. The life cycle framework shows that automobile industry has a negative impact, overall, value chain. The poor resource procurement, inefficient production and higher consumption cost have high environment and social cost associated with the automobile industry (Karabasoglu and Michalek, 2013).

For example, Volkswagen’ manipulated the emission systems in the diesel vehicles, which raised the ethical and environment issues. The tampering of the emission levels showed the lower level of nitrogen emission (Park, Egilmez and Kucukvar, 2015).

Eberle, Muller and Helmolt (2012) analysed the TBL encloses social issues involve human capital development, best labour practices and contribution to community and environment suggest that uses resources, which meet the need of future generations. The technology change such as equipment replacement, automation and optimal process contribute towards resource and environment efficiency. The failure to use right technologies delivers poor resource efficiency and no eco-efficiencies for the companies. The development of new vehicle by Honda and Toyota fuel by hydrogen and electricity still relevant underdeveloped phenomena and completely automobile industry have failed to rip the benefits of new technology (Henriques and Richardson, 2013).

The poor production capabilities and resources utilization in the automobile industry by various companies has affected the industry symbiosis, which has restrained the automobile industry to achieve sustainability through its value chain. The automobile industry needs to redefine its sustainability claim and reduce the social environment impact of its unsustainable products (Zhang et al., 2015).

Business Ethics and Corporate Social Responsibility (CSR)

Business ethics is concerned with the application of rule and principles which help to determine the wrong and right of the business situation. Business ethics involves situation, the decision as well as activities which address wrong and right for the business. Utilitarianism theory focuses on the collective welfare of society based on rules which promote the concept of avoidance of gain of pleasure (Shaw, 2016).

The ethics of duties, right and justice embrace categorical imperative for duties as well as respect for human being. The deceptive information in the recent emission scandals has highlighted the ethical dilemma of the automobile industry (Riley, 2015).

Nicolaescu (2013) added that business ethics and sustainability involves addressing waste disposal, reducing product packaging and minimising the pollution to preserve and manage the environment. The example of the Ford Pinto problem in which company was exposed to the fire the rear end was depictive practices of the company. Another example is BMW where supplier executive was involved in the bribes offering (BMW vehicles) in exchange for the purchase contracts.

Turker, Toker and Altuntas (2013) mentioned that the investigations highlighted that company had full knowledge of problem but calculated that it low cost to pay injuries rather producing sustainable products. The malpractices and deceptive communication of the companies in the automobile industry have raised concerns and challenges in the automobile industry. The malpractices and delivery of faculty product to the customer despite the company knowledge showed that automobile industry companies have ignored the ethical and human right of the companies.

Corporate social responsibility (CSR) is a concept in which companies integrates environment and social concerns in the operations of the business to manage the interaction with stakeholders on the voluntary basis. According to Freeman, stakeholders are individual or group of people who interest in the action of strategy of the company (Carroll and Buchholtz, 2014).

Broman et al (2013) analysed that CSR enclosed the discretionary expectation on issues of economic, ethical and legal concern linked to organisation in a society. CSR is commitment of the organisation towards the society to make economic contribution, which improves the life of workforce and contributes towards sustainable communities. The CSR linked to business issues that company need to manage the expectation of shareholders while minimising the impact on society.

For example, the automobile industry has range of issues such as new product (electric vehicles), environment and emission problem and public safety to integrate and achieve the sustainability and address the ethical dilemma of the automobile industry (Lester, 2015). For example, Volkswagen and BMW have integrated CSR in their business practices through design green cars which are fuel efficient and promote economic development.

Carroll and Buchholtz (2014) proposed three domains of CSR are economic, ethical and legal. The sustaible economic development mean contibuting towards the economy and giving back to the society. For example, Audi in china manage its business through collaboration wit lcoal partners, providing jobs to lcoal people as well as making social contribution to local foundations. The ethical perspective address the business of unethical practices of the companies. For example, Automobile industry needs to reflect commitment towards the ethical and moral ground by providing appropriate and accurate information.

For example, Daimler has bribes scandals in which company has paid $185 million in over 22 countries. The company accused of paying bribes over the period of ten years (Christen and Schmidt, 2012).

Corporate social responsibility (CSR) elaborate that business has extended responsibility towards compare to their tradition legal and economic obligations. It is important that business stays within defined rule of games in terms of resources and activities to increase profits. Automobile industry practices highlight that failure to compliance with law, compromising the public safety, poor resource utilization and excessive emission has to breach the social, moral and environment duties of the automobile industry (Kotchen and Moon, 2012).

The range of issues tax avoidance in the UK (lobbying the PM), Bribery, hiding the public safety information as well as lack of integration across the industry raise the ethical issues and question the integrity of financial reporting of automobile industry.

The need for various stakeholders should be integrated to make the positive contribution towards society, preserve the environment and increase shareholders wealth. The CSR model allows to interate ethcial approach in the business operations as well as deliver value to shareholders(Flammer, 2013).

The environment and philanthropy allow the company to address the environment concerns whereas philanthropy highlights the contribution for the welfare of the local people. For example, general motors in Brazil are a key sponsor of a number of educational programs in the country. Suzuki motors manage clean water and education in India to encourage the welfare of the people.

Baumgartner and Korhonen (2010) elaborated that the introduction of alternative fuel based hybrid cars in an attempt to reduce the carbon footprint. For example, Tesla motor is committed to providing electric vehicles, which reduce the carbon footprint. The autopilot function in car ensures the safety of people. CSR and sustainability highlight the need for the long-term solution to address environment concerns, contribute towards society as well as environment protectionism to reduce damage to the earth

Holistic perspective – evaluation of Sustainability in automobile industry

TBL allows the organisation to evaluate their environment and social performance and encourage economic development growth in sustain manner. The automobile industry has faced various challenges, which have hindered the suitable practices in the industry. For example, the profitability approach has resulted in failure to compliance with product regulation and compromise the public safety (Henisz, 2014).

The automobile industry has faced high social, environment and legal cost from such malpractices. The hefty fine, deaths, poor product quality represents the legal and economic cost of failure for the automobile industry. The evaluation of the automobile industry in the triple bottom line has highlighted poor performance (Kuik and Verbruggen, 2012).

Dodgson, Gann and Phillips (2013) explained that TBL measures the performance of business in terms of people, plant and environment. TBL allows the business to protect environment through recycled materials as well as producing efficient car. For example, Nissan is producing much of interior of cars from the recycled materials. Toyota encourages local production which regional sustainable economic development.

Henriques and Richardson (2013) added that CSR is commitment of the organisation towards the society to make economic contribution, which improves the life of workforce and contributes towards sustainable communities. The integration of the legal, ethical and economic responsibilities is the foundation for sustainability. The matching of the company activities with the need for the society and addressing the environment issues are important parameters. The ethical behaviour is imperative to achieve the sustainable development through enforcing culture and share values. The ethical behaviour is an image of the company which create trust among the internal and external stakeholders.

For example, accountability is one the important principles which is important especially in automobile industry because the emission scandals and product recall. Accountability would increase transparency and reduce the social cost for the companies. The evaluation of the automobile industry in the light of CSR pyramid has shown the ethical, legal and economic challenges. The integrity of the process would ensure the business environment is well understood and companies are committed to societal value, morals and environment preservation (Schoenherr, 2012).

Posner (2015) suggested that the sustainability approach is based on the societal approach for innovation, industry reconfiguration and regulatory reforms can revamp the automobile industry. The economic cost of the product in the industry is high because of faulty parts and lack of integration. The societal challenges such as public safety and contribution towards society are low and companies have remained surrounded by negative news. Similarly, environment problem in the automobile industry represents danger to climate because of emission and poor quality products.

Alves and Medeiros (2015) elaborated that the first stage involves is compliance with rules and regulation with industry practices. For example, cutting emission and reporting true and fair information would increase the stakeholders trust toward the automobile industry. The innovative and sustainable product development, which meet the compliance and ensure customer safety, will deliver positive benefits for all stakeholders.

Leadership and Sustainability

A structural and integrated approach for sustainability is presented by the Orsato (2009) through analysing the range of the factors in the automobile industry (Missimer et al., 2010). The diagram below shows the role of the leader in managing sustainability in an organisation. The innovative product, code of conducts and integrated processes are critical for the better performance of the companies. The sustainable practices in an organisation are linked with time, managers’ action and their expected outcome (Fistis et al., 2014).

Broman et al (2013) added that The commercialization perspective involves building industry ecology which helps to develop reliable products, reduce waste and encourage transparency to achieve eco-efficiency and eco-effectiveness. For the certification from the industry regulators likely to increase the consumer trust and confidence in the products of the automobile industry. the reinvent stage high the relationship between the industry processes and defining strategies which add value to the whole value chain of the automobile industry (Cavagnaro and Curiel, 2012).

The re-invent would allow to improve the processes, develop safe and competitive products and deliver positive for all stakeholders through differentiation. The commercialization highlight the system involvement to develop an approach which integrates the environment, economic and legal perspective for various stakeholders. The interrelationship of the ecology, social system and stakeholders need would allow delivering products which are sustainable (Werbach, 2013; Visser, 2015).

The re-invention and system integration is useful to deploy the sustainability approach across the organisation processes and practices for unified principles for sustainability. The development of the product which is safe and sustainable which helps to preserve the ecological system, better value for money to the customer and contributes towards the shareholders wealth rather paying a large fine and damaging corporate reputation. The development of strategies and rule of law set the foundation for reliable and valid reporting which ensure the trust of the stakeholders  (Dodgson, Gann and Phillips, 2013).

The implementation of strategies which integrate the industry technology would save the resources, cut the emission and reduce cost. The life-assessment is useful to encourage the promote sustainability (Gunasekaran and Spalanzani, 2012). The procurement of materials, code of conduct, eco-efficient products and customer safety is key to the sustainability of the automotive industry. Leadership in automobile industry should evaluate their practices and strategies to develop better understanding of the system to interstate the social, economic and legal perspective for current and future success (Hallstedt et al., 2010).

Conclusion

The business sustainability is based on the ethical ground and sustainability development practices of the companies. The sustainable development and ethical issues highlight that automobile industry is focused on making short-term gains while less concerned with the code of practices and regulatory compliance. The business success is ground on the ethical, social and legal foundation which helps the companies to address the border society and environment concerns.

The lack of eco-effectiveness and unethical behaviour of the companies in the automobile industry has overlapped the business case and moral imperatives. The emergence of one after another scandal in the automobile industry whether is based on the emissions, wastage of resources, mal-practices or bribery and tax problems. The automobile industry needs to redefine its sustainability claim and reduce the social and environment impact of its unsustainable products.

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