Toyota Sustainable Development Concept - Dissertation Example

?How can a company pursue sustainable development in order to contribute to excellence competitive edge and financial position? Lessons from Toyota (Name) (Course) (Assignment No:) (Date) Executive Summary There is a growing need of following sustainable business practices in the modern industry environments. The concept of sustainable development is highly relevant because today man-made interventions in the environment pose potential threats to the state of environment. This research explores how companies can support sustainable development to improve their competitiveness in the light of the lessons from Toyota. This study mainly relies on secondary data to gather qualitative as well as quantitative data in order for meeting the research objectives. The findings indicate that Toyota strongly supports the concept of sustainable development to gain a competitive edge over its rivals. The sustainable business operations have greatly benefited the TMC to improve its competitive edge and strengthen its financial position. Toyota has been successful in making their customers aware of the company’s environmental sustainability efforts. The organisation increasingly relies on sustainability reports and social networking sites to communicate its sustainability initiatives to the company stakeholders. Table of Content 1. Executive summary 2. Introduction 3. Literature review 3.1 A brief overview of Toyota 3.2 Importance of sustainable development 3.3 Toyota and sustainable development 4. Methodology 4.1 Approach 4.2 Research design 4.2.1 Purpose of research 4.2.2 Methods and strategy 4.3 Credibility research 5. Findings 6. Conclusions References 2. Introduction The emergence of globalisation eliminated international trade barriers and thus intensified cross border flow of capital, labour, ideas, and cultures. Evidently, globalisation and the resulted fast industrial expansion contributed to various issues like global warming, climate change, water pollution, and increased energy consumption, which in turn pose potential threats to the long term sustainability of the environment today. There has also been a notable increase in the population growth over the last two decades, and that worsened the condition. Researches indicate that world’s current non-conventional energy sources will be consumed out if people and organisations continue to consume the energy at the current rate. Therefore, it is necessary to limit the use of conventional energy sources, maintain water quality, and take other environmental actions to meet the needs of future generations. However companies like Toyota have adopted the concept of sustainable development to drive environment-conscious growth and thereby enjoy wider market acceptance. TMC encourages and establishes innovative technologies to reduce the environmental impacts of its business operations and inspires local communities to support the company’s environmental efforts. In this context, it is relevant to explore how a company can pursue sustainable development in order to contribute to the competitive edge and financial position. 3. Literature review 3.1 A brief overview of Toyota Toyota Motor Corporation (TMC) is the world’s leading automobile manufacturer headquartered in Japan. The organisation was founded on 28th August 1937 by Kiichiro Toyoda. As of 2010 Toyota employed 300,734 people worldwide to run its business and the company was rated as the largest automobile manufacturer in the world by means of production (Toyota: CSR & Sustainability News). TMC is a part of the Toyota Group and currently the organisation has presence in almost all countries across the globe. Since its foundation, the organisation has been particularly focusing on quality because the management believes that quality is the key to brand loyalty. In order to ensure improved product quality, the organisations has developed extensive production line strategies which can make sure that production and assembly processes are in line with accepted industry standards. According to reports, one of the major factors that place TMC ahead of its competitors in the automobile sector is that the company maintains a well developed Total Quality Management (TQM) system, the purpose of which is to enhance quality assurance and thereby to meet increased customer satisfaction (Anvari & Ismail et al. 2011). In addition, Toyota gives particular focus to other aspects like speed, dependability, flexibility, and cost. Finally, today the organisation pays particular attention to social responsibility programmes to express its commitment to the environment and people. 3.2 Importance of sustainable development The concept of sustainable development is a potential and planned way of human development where natural resources are utilised to meet growing human needs and to promote environmental sustainability simultaneously. The most fascinating feature of this concept is that it gives particular focus to the needs of future generations. The concept of sustainable development was introduced by the Brundtland Commission Report (Our Common Future), published by the Oxford University Press in 1987 (UN, Report of the World Commission on Environment and Development, n.d.). The term sustainable development was coined by the Brundtland Commission. The Brundtland Report is the summary of a ‘900 day’ international work, which was carried out jointly by government officials, research institutions, scientists, NGO representatives, industrial concerns, and the general public. The Report proposed three major aims. First was to understand current environmental issues and develop potential responsive measures to address the issues identified. The second aim was to improve international co-operation on promoting environmental sustainability through driving policy changes and new policy formations. The third aim focused on creating environmental safety awareness among businesses, government bodies, and the general public. According to the Brundtland Report, the concept of sustainable development can be simply referred to the “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (United Nations General assembly, 1987). It is to be noted that the concept of sustainable development encompasses economic sustainability and socio-political sustainability in addition to the promotion of environmental sustainability. The concept of sustainable development has been gaining more and more relevance in the modern world because it seems to be a comprehensive policy capable of enhancing economic, socio-political, and environmental sustainability (Blewitt, 2012. p.na). Although this concept covers different facets of development, it specifically emphasises the need of promoting long term sustainability. In the current context of ongoing global economic downturns and intensifying environmental problems, the idea of sustainable development is of considerable significance (Boyle & Freestone, 2001, p.5). Today the government and the business world have realised the dreadful consequences of thoughtless industrial and construction development, which had contributed to threatening environmental issues like global warming and climate change. In addition, unregulated business activities result in the fast depletion of non-renewable energy sources. Today the concept of sustainable development is very important in terms of economic sustainability too because recently the global economy was severely hit by a number of bank failures and corporate scandal, which were stemmed out of greedy business practices. The concept of sustainable development addresses several aspects such as population, climate change, water, and energy because these elements notably contribute to the growing environmental issues in the modern world. As Charter and Polonsky (1999) point out, nearly 80% of the world’s resources are consumed by 20% of the world’s population. This situation raises potential challenges to the balanced distribution of world’s resources in the context of fast growing population rate. Forecasts indicate that the population growth trend in developing countries is likely to remain over the next decades. The environment is unable to accommodate the current rate of population growth, and the world’s resources will be consumed out in the near future if population continue to develop at the current rates. Energy consumption has tremendously increased over the last few decades as a result of globalisation and the resulted increase in cross border trade (Emmanuel, 2012, p.12). Today the world has discovered almost 90% of its conventional oil reserves, and hence the oil reserves are likely to disappear in the near future. When the world discovered 42 billion barrels of new reserves over the period 1990-2000, the world consumed 250 billion barrels in the same period (World Energy Supply, n.d.). This statistical data clearly indicates the huge gap between the discovery and consumption of conventional reserves. It is dreadful to see that fast developing countries, particularly BRICS countries, consume energy at an increased rate so as to meet their growing energy needs. Climate change is also growing to be a potential threat to the global community as this issue adversely affects agricultural production and health (Huq, et al. p.390). It is identified that climate change can notably contribute to global warming. “The average surface temperature of the Earth is likely to increase by 2 to 11.5°F (1.1-6.4°C) by the end of the 21st century, relative to 1980-1990, with a best estimate of 3.2 to 7.2°F (1.8-4.0°C)” (CDKN, 2011). (see figure 1). Figure 1 (Source: Future Climate Change, EPA, 2013). Evidently, global warming will result in melting of ice, which in turn will lead to an increase the ocean level. Global warming increases the average temperature at the surface of oceans and this change is extremely harmful to aquatic organisms. Floods, extreme droughts, increased acidity of seawater, changing ecosystems are some other harmful effects of global warming. Finally, decreasing supply of drinking water has grown to be an environmental and humanitarian issue in the modern world. According to a report by the World Health Organisation, water-related diseases result in the death of nearly 3,500,000 people every year worldwide. It is dreadful to see that children in the age of 14 and below represent 84% of those deaths and 98% are reported in developing countries. Since industrial operations and poorly planned business activities significantly contribute to these environmental issues, the concept of sustainable development is of great importance in the current business environment. In addition, this concept can address other environmental impacts such as air pollution, sound pollution, and deforestation. Today people are increasingly concerned about environmental safety, and therefore they are less likely to support a business that does not comply with current environmental laws and regulations. In order to remain competitive in the market environment, business houses worldwide have begun to emphasise corporate social responsibility that can meet the interests of the general public. For instance, today multinational enterprises prepare a sustainability report along with annual financial reports to reveal the environmental impacts of its business operations. In short, the concept of sustainable development is of growing importance in the modern business environment because it can have great influence on the business success. 3.3 Toyota and sustainable development In 2005, the TMC announced “the Contribution toward Sustainable Development, an interpretation of the Guiding Principles at Toyota that takes into consideration Toyota’s relations with stakeholders” (Toyota's CSR Concepts, n.d.). It was amended in 2008 to become the CSR POLICY: “Contribution toward Sustainable Development to take into account subsequent environmental changes and heightened societal interest in CSR” (Ibid). Today the CSR Policy influences the corporate operations of Toyota, and the organisation’s top management considers this policy while making strategic decisions. According Toyota’s CSR policy, the organisation is committed to contribute to the sustainable development of the society and the earth through various business operations it carries out in countries across the globe. Based on its Guiding Principles, Toyota strives to comply with local, national, and international laws and regulations and tries to address the interests of the common people. Toyota’s management believes that constantly interacting with stakeholders and building sound relationships with them through open and fair communication can greatly benefit the company to contribute toward sustainable development. The company’s CSR Policy particularly states that the company management is committed to minimise the environmental impacts of its business operations. As part of this policy, the company takes great efforts to reduce the effects of its vehicles and operations on biodiversity and climate change. The organisation tries to develop and promote technologies that are capable of enhancing the sustainability of the environment as well as the economy. Toyota is interested to work closely with individuals and organisations that are involved in environmental preservation efforts. ‘Respect for people’ is one of the fundamental working principles of Toyota, and the company’s top management promotes this ideology by honouring the culture, traditions, and laws of countries in which it operates (Barnhart, 2012, p.24). The firm constantly strives to develop safer, cleaner, and innovative technologies that are potential enough to meet the growing needs of people for sustainable mobility. The company has expressed its commitment to actively participate in social responsibility activities that would strengthen communities and contribute to the overall uplift of the society. Recently in 2011, Toyota framed ‘Toyota Global Vision’, which is based on the company’s Guiding Principles. In order to achieve this vision successfully, the TMC has drafted a medium to long term management plan and is currently working toward the achievement of the goals stated in the plan. In addition, the Toyota Way 2001 and the Toyota Code of Conduct give employees a precise path in performing their day to day activities efficiently and in the best interests of stakeholders. The company promotes its environmental responsibility through the development of sustainable vehicles, eco-friendly manufacturing activities, eco-driving educational programmes, and reforestation. In addition, the company engages in a wide variety of other programmes to ensure the long term sustainability of the environment. While analysing Toyota’s initiatives on the environment, it seems that the organisation aims at ‘establishing a low-carbon society’, ‘establishing a recycling-based society’, and ‘receiving and continuing the blessings of nature’ (Sustainability report 2012). The organisation strives to reduce the environmental impacts of different stages of vehicle life cycle, from design and development to waste and recycling. It is clear that increased volume of CO2 emissions is the major cause contributing to environmental issues like global warming and greenhouse effect. Reports indicate that CO2 emissions from passenger cars make up nearly half the emissions in the transportation sector. Therefore reducing CO2 emissions from passenger cars is significant for Japan to achieve the targeted 6% reduction in CO2 emissions, which was agreed in the Kyoto Protocol. It is identified the eco driving or environment-conscious driving is a better strategy to reduce the emission of CO2. Avoiding traffic congestion, unloading unnecessary items, and better tyre maintenance are some of the key principles of eco driving. The Toyota management considers fighting global warming as a priority management issue, and the company has implemented a number of measures to reduce CO2 emission by limiting energy consumption at all stages of vehicle manufacturing and in all areas of business operations. The company promotes the development of improved technologies that can offer the best fuel efficiency performance, which is important for reducing CO2 emissions. Likewise, the organisation encourages effective introduction of clean-energy vehicles so as to ensure their wider market acceptance. Toyota is introducing renewable energy to prevent the fast depletion of non-renewable energy sources and to limit CO2 emissions. Currently Toyota’s photovoltaic generation system at the Tsutsumi Plant is rated as the world’s largest solar energy-based automobile production plant with an output of 2,000 kW (Toyota, Using Renewable Energy, n.d.). Toyota gives specific focus to establishing a recycling-based culture in order to use the Earth’s limited resources and to ensure the wellbeing of future generations effectively. TMC successfully deals with automobile recycling through the use of advanced and potential technologies. 4. Methodology 4.1 Approach Deductive as well as inductive approaches were used to complete this research. The deductive approach is based on testing existing theories whereas the inductive approach is focused on the development of new theory emerging from the data (Gabriel, 2013). When a hypothesis is usually the starting point of the deductive approach, the inductive approach relies on research questions to narrow the scope of the study. Generally inductive approaches are concerned with qualitative research whereas deductive approaches are more commonly related with quantitative research. This research used the findings to support or weaken the theory. The research paper used deductive approach to explore the first to third objectives whereas the fourth and fifth objectives were explored using the inductive approach. 4.2 Research design A comprehensive design was developed for this research, and that is described below in detail. 4.2.1 Purpose of research The aim of this research was to explore how a company can pursues sustainable development in order to contribute to excellence competitive edge and financial position based on the lessons from Toyota. The objectives of this study include: To recognise the importance of promoting sustainable development. To evaluate how Toyota supports the concept of sustainable development. To understand how this concept contributes to Toyota’s competitive position as well as financial position To identify if consumers are aware of the sustainability efforts taken by Toyota. To analyse how customer awareness influences customer behaviour. 4.2.2 Methods and strategy The research used quantitative as well as qualitative methods; and mainly depended on secondary data to obtain a detailed view of the research subject and draw up potential recommendations and conclusions. Scholars like Grady and Hearst (2007, p. 207) have described the benefits of using secondary data for research purpose. According to them, the major advantages of secondary research include ease of access, low cost, clarification of research question, fewer resource requirements, and unforeseen discoveries (Ibid). To identify how a company can pursues sustainable development in order to contribute to excellence competitive edge and financial position based on the lessons from Toyota, this study collected data from books, peer reviewed journals, Toyota websites, Toyota sustainability reports, literature reviews, newspapers, articles, and other publications. Secondary research is a good strategy to complete the research work within the specified period of time. 4.3 Credibility research The results of this research were critically analysed in the background of other similar research reports so as to determine whether or not the results were same and thereby improve the reliability of results obtained. In addition, these results were checked against some scholarly views from literatures to ensure the relevance of data. 5. Findings The literature review clearly points to the significance of sustainable development in the modern society. It is also identified that Toyota greatly supports this concept because the company management believes that sustainable products and operations are inevitable to influence modern customers and to remain competitive in the market. From the literature review, it is identified that Toyota has developed a specific sustainability policy for each of its global market segments considering particular geographical and environmental features of the market. While analysing Toyota’s operations in UK, it seems that the company follows a three pillar strategy to provide a direction for its all future environmental activities. The three pillar approach is illustrated below. (Source: Toyota, Sustainable Plant, n.d.) The organisation constantly encourages and develops innovative production technologies to reduce the environmental impacts of its operations such as CO2 emissions, water pollution, and air pollution. The organisation greatly promotes the use of renewable energies like solar and wind energy, biomass, and geothermal energy to prevent the excessive use of conventional energy sources. Since the organisation’s environmental initiatives are based on local communities, Toyota’s sustainability efforts really hit the target. Toyota encourages and engages the local community to support its environmental initiatives, and this practice greatly assists the company to inspire local people. Hence, the combined efforts of Toyota and the local community are capable of preserving and promoting the local eco-system. In short, the firm’s business operations are in harmony with its natural surroundings. Evidently the community based sustainability operations of Toyota have significantly contributed to the firm’s competitive status as well as financial position. To illustrate, today TMC is one of the most successful companies in the world. Toyota was ranked as the world’s fifth largest company in a Fortune survey conducted in 2010, and it was also rated as the 11th best global brand in the same year (Brand Finance Global 500, 2012). Toyota is considered as the most profitable organisation in the automobile industry and the company was consistently rated among top automotive brands for almost 15 years by J.D. Power and other research firms. Toyota introduced the world’s first commercial hybrid car Toyota Prius, which was a milestone in the corporate history of the TMC (Toyota, Company background). According to leading research firms like J.D. Power, Toyota has been gaining significant competitive advantages over its market rivals in terms of quality, reliability, reputation, and long term durability. It is important to note that Toyota was one of a few companies that survived the recent global recession without much trouble. In the financial year 2012, total shareholders’ equity of Toyota increased by 146,454 million yen (Toyotaglobal, Financial summary 2012). Undoubtedly, a well structured and promising CSR Policy played a notable role in promoting Toyota’s rapid global expansion. The environment-conscious operations of TMC are greatly benefiting the company to keep its three brands including Toyota, Lexus, and Scion appealing to customers in the passenger car market. The company’s environmental efforts played a noticeable role in making its brands popular. Referring to different market studies, it is identified that consumers are well aware of the sustainability initiatives taken by TMC. The organisation prepares a sustainability report along with its financial statements at the end of the financial year to communicate the environmental impacts of its market operations to stakeholders. This report outlines all the environment sustainability activities performed by the company in the previous year and it also describes the planned future sustainability initiatives. The company keeps its sustainability report simple and easily understandable to all stakeholders including common people. It seems that company effectively uses social networking sites like Facebook and Twitter to promote its sustainable products and services. Evidently, this type of online promotion techniques benefits the company to create increased customer awareness about the firm’s sustainability efforts because today most of the people have access to internet, and they use social networks. Increased customer awareness about environment safety can influence their behaviour significantly. As discussed already, today people are very much concerned about environmental safety as a result of various environmental programmes promoted by governmental agencies and other global interest groups like WHO. People are really bothered about fast depleting conventional resources, and hence there is a shift toward renewable energy sources like solar and wind. Hence, people are likely to prefer petrol/diesel fuelled vehicles to solar powered or hybrid vehicles in the coming years. The renewable energy-powered vehicles can also play a notable role in reducing the volume of CO2 emissions significantly. It is clear that TMC has a strong presence in the hybrid cars market, and hence its sustainability efforts are greatly appreciated worldwide. Toyota has been successful in communicating its sustainability initiatives to the stakeholders around the globe, and this competitiveness assists the company to influence the customer behaviour positively. 6. Conclusions Lessons from Toyota indicate that the organisation has been successfully pursuing sustainable development in order to contribute to excellence competitive edge and financial position. In the first objective, it was identified that the concept of sustainable development is extremely important to address growing environmental issues in the modern world and to do business in the best interests of the general public. The fast growing population, climate change, water pollution, and increased energy consumption pose great threats to the environment, and the automobile industry also considerably contributes to all these problems. Therefore, it is inevitable for Toyota to promote the concept of sustainable development so as to maintain its competitive position in the passenger car market. In the second objective, it is obvious that Toyota strongly supports sustainable development based on its Guiding Principles and CSR Policy. The organisation strives to reduce CO2 emissions from its operations through innovative technologies. In addition, the firm also pays particular attention to the development of new potential renewable energy sources so as to reduce CO2 emissions and to limit the consumption of conventional energy sources. TMC promotes eco driving to prevent the wastage of energy. In the third objective, it is clear that the concept of sustainable development has benefited TMC to improve its competitive as well as financial status. Toyota still remains to be the most profitable organisation in the automobile industry, and it is one of the world’s most recognized and reputed brands. The extensive environmental initiatives have assisted the company to rapidly spread its business worldwide, and to enjoy wider market acceptance. Finally, the practice of pursuing sustainable development helps the company gain strong government support. In the fourth objective, it seems that customers in the automobile sector are really aware of the strong sustainability efforts taken by TMC. The online promotion of environmental initiatives has benefited the company to communicate its CSR Policy to more number of people around the globe. In the fifth objective, it is identified that increased customer awareness about environmental sustainability greatly influences their behaviour. Customers are likely to purchase sustainable vehicles (renewable energy-powered vehicles) over the next decades because they have become increasingly concerned about environmental sustainability. References Annette, P & Robert, B et al. 2008. “Quantifying environmental health impacts”. World Health Organisation, [online]. Available at: http://www.who.int/quantifying_ehimpacts/publications/saferwater/en/index.html [accessed 17 Dec 2013]. Anvari, A & Ismail, Y et al. 2011. “A Study on Total Quality Management and Lean Manufacturing: Through Lean Thinking Approach”. World Applied Sciences Journal,12 (9): 1585-1596. Blewitt, J. 2012. Understanding Sustainable Development. US: Routledge. Boyle, A & Freestone, D. 2001. International Law and Sustainable Development: Past Achievements and Future Challenges. NY: Oxford University Press Brand Finance Global 500. 2012. The annual report on the world’s most valuable global brands. [online] Available at: http://www.brandfinance.com/images/upload/bf_g500_2012_web_dp.pdf [Accessed: 19 Dec 2013]. Barnhart, T. M. 2012. Creating a Lean R&D System: Lean Principles and Approaches for Pharmaceutical and Research-Based Organizations. US: CRC Press. CDKN. 2011. Baby steps on climate cooperation bring small victories, but not enough to stave off climate-related suffering. [online] Available at: http://cdkn.org/2011/06/bonn2011/ [Accessed: 19 Dec 2013]. Charter, M., Polonsky, M. J. 1999. Greener marketing : a global perspective on greening marketing practice . 1st ed. Sheffield : Greenleaf EPA. 2013. Future Climate Change. [online] Available at: http://www.epa.gov/climatechange/science/future.html [Accessed: 19 Dec 2013]. Emmanuel, R. 2012. An Urban Approach To Climate Sensitive Design: Strategies for the Tropics. US: Taylor & Francis. Gabriel. D. 2013. “Inductive and deductive approaches to research”. [online]. Available at: http://deborahgabriel.com/2013/03/17/inductive-and-deductive-approaches-to-research/ [accessed 17 Dec 2013]. Grady, D & Hearst, N. 2007. “Utilizing existing databases”. In Designing Clinical Research. S. B. Hulley (Ed.). US: Lippincott Williams & Wilkins. Huq, N. et al. 2011. “Climate proofing water resources development policy: The evidence from Bangladesh”. In Climate Change and the Sustainable Use of Water Resources. W. L. Filho (Ed.). US: Springer. Sustainability report 2012. Summary of Toyota’s Initiatives on the Environment. [online] available at: http://www.toyota-global.com/sustainability/environmental_responsibility/pdf/env_summary.pdf [accessed 18 Dec 2013]. Toyota. 2013. Sustainable plant. [online] Available at: http://www.toyotauk.com/environment/sustainable-plant.html [Accessed: 19 Dec 2013]. Toyota's CSR Concepts. Toyota. [online]. Available at: http://www.toyota-global.com/sustainability/csr_initiatives/csr_concepts/policy.html [accessed 17 Dec 2013]. Toyota. (n.d.). Using Renewable Energy. [online]. Available at: http://www.toyota-global.com/sustainability/environmental_responsibility/establishing_a_low_carbon_society/using_renewable_energy.html [accessed 17 Dec 2013]. Toyotaglobal. Financial summary 2012. [online]. Available at: http://www.toyota-global.com/investors/financial_result/2012/pdf/q4/summary.pdf [accessed 17 Dec 2013]. Toyota: CSR & Sustainability News. [online] available at: http://www.triplepundit.com/topic/toyota/?doing_wp_cron=1387304773.8405890464782714843750 [accessed 18 Dec 2013]. Toyota. Company background. [online] available at: http://media.toyota.co.uk/wp-content/files_mf/1373621184130319MToyotaCompanyBackground.pdf [accessed 18 Dec 2013]. United Nations. 1987. General Assembly. 96th plenary meeting. [online]. 11 December. Available at: http://www.un.org/documents/ga/res/42/ares42-187.htm [accessed 17 Dec 2013]. UN. (n.d.). Report of the World Commission on Environment and Development: Our common future. [online] available at: http://www.un-documents.net/our-common-future.pdf [accessed 18 Dec 2013]. World Energy Supply. [online]. Available at: http://www.theglobaleducationproject.org/earth/energy-supply.php [accessed 17 Dec 2013]. Read More