The Origin and Effect of the CERES Principles - Assignment Example

Heading: The Origin and Effect of the CERES Principles Name: Institution: Course: Tutor: Date: The Origin and Effect of the CERES Principles In the year 1980, the CERES principles were developed following the Exxon Valdez oil spill that had the worst effects in history. The tanker leaked 24 000 barrels of crude oil which is equivalent to 11 million gallons. The oil spread to pristine waters of Prince Williams Sound and to the Gulf of Alaska. This affected many birds and fish whose habitant was in the affected waters. Most of them were killed while others were injured (Ferrell,Fraedrich, &Vaughn, 1998). The other wildlife that lived in the waters was also adversely affected. This led the shut- down of the fishing grounds that were operated in those waters. Many businesses were affected and a lot of income was lost. The effects of this oil spill were so bad such that they could be felt even today decades after the spill occurred. This prompted environmentalists to find ways in which they could prevent the occurrence of such an event in the future. Together with the Exxon Valdez CEO, environmentalists developed the CERES principles which advocate for corporate environmental practices by organizations (Ferrell,Fraedrich, &Vaughn, 1998). This assignment is a discussion of questions on the in the environmental report: The Origin and Effect of the CERES Principles. Question 1 The CERES principles were developed shortly after the Exxon Valdez oil spill. Initially, the principles were referred to as the Valdez principles. They were later renamed as CERES principles. The CERES principles were formed following the alliance formed by Joan Bavaria who was the president of Trillium Asset Management by then, with other environmentalists. The major objective was to change the corporate environmental practices. Therefore, in my opinion, the CERES principles could still be formed even if the Exxon Valdez oil spill did not occur. However, the oil spill led to the principles being developed earlier than it could have occurred.This is because the need for environmentally responsible principles was still there even before the Exxon Valdez oil spill occurred. For instance, there existed criticism against the General Motors (GM) Ltd for its production of vehicles which were not fuel effective. Fuel is one of the causes to environmental pollution. In addition, there were other organizations which advocated for a green environment long before the Exxon Valdez oil spill occurred. Among these organizations include; Ben & Jerry’s, The Body Shop, Seventh Generation as well as Aveda. It is imperative to note that the Exxon Valdez oil spill was not the largest in history. There were other larger spills that had occurred before and they also caused environmental damage. They created the need for corporate environmental practices. However, the Exxon Valdez spill caused the worst local business disruption notably the fish business which was generating over $100 million every year. It also lend to long term environmental damage which are actually felt to date, about two decades later. This actually accelerated the formation of the CERES principles. The issue of environmental responsibility became main-stream towards the end of 1980s as well as in the early 1990s.Companies started presenting their reports on environmental protection. It is at this time that most companies started realising the value in environmental friendly practices especially the multinationals. I think the idea of CERES principles could have come at this time if the Exxon Valdez oil spill did not occur. The CERES principles add value to the current business environment. For a long time, there has been advocacy for a green environment. Customers have realised the need for green environment and therefore they prefer organizations which are environmentally responsible (Walley& Whitehead, 1994). Soon after the Exxon environment occurred, many customers withdrew their interests from the organizations. They cut their cards and returned them to the company in protest. Therefore, the CERES principles add value to business organizations in that they help the businesses in maintaining their current customers as well as attract new customers. This helps the organizations to maintain their profits. In addition, thebusiness organization will be in a position to develop sustainability. The objective of almost all businesses leaders is to maintain growth within the organizations, as well as profitability and competition. This would only be possible if there is sustainability in the organizations as well as long term creation of value. Leaders should therefore develop sustainable strategies. One way to develop sustainable strategies is to ensure environmentally friendly practices. CERES principles offer this the business environment. Business organizations have the ability to influence the behaviour of human beings as well as their decision making. This includes the consumers buying behaviour and their decision making regarding purchase of certain product or service. Companies which endorse CERES principles show their corporate responsibility to the consumers, suppliers and shareholders. They will therefore attract the interest of shareholders who will be willing to invest in the company. Suppliers and consumers increase their commitment to the company. In this way, the CERES principles add value to the business environment. Companies who support the CERES principles are committed to producing goods and services which are safe. This would reduce the environmental and health hazards that would result from unsafe products and services. This would create trust among customers to the organizations. One of the CERES ten principles is risk reduction. Under this, organizations would minimize health, environmental and safety risks to their employees as well as to the rest of the community. In doing this, companies will develop safe technologies, operating procedures as well as facilities. They will also be prepared to deal with any emergency that may arise. This way, employees will feel safe working in the organization. They will be motivated and as result they can give their best in their work. The overall result of this would be a good performance by the organization. Good performance is the objective of any organization. CERES principles therefore add value to the business environment in that they help in improving the performance of business organizations. Question 2 With a close evaluation, it is notable that the CERES principles share some commonality with the Federal Sentencing Guidelines for organizations. The Federal Sentencing Guidelines for organizations (FSGO) are guidelines which were developed in the United States if America in the year 1991. Their main objective was to prevent organizational employees and other stakeholders from committing federal crimes. The Federal Sentencing Guidelines for organizations impose heavy and harsh penalties on organizations whose employees commit such crimes. The penalties depend on the severity of the crime committed and they may include; community service, remedial orders, reinstitution, and substantial fines among others. The fourth chapter of the Federal Sentencing Guidelines for organizations touches on ethical and unethical behaviours of employees. It indicates that employees of all the organizations in the United States of America should behave in an ethical manner (Ferrell, Fraedrich& Ferrell, 2013). The first similarity between the CERES principles and the Federal Sentencing Guidelines for organizations is that they both prevent unethical behaviours of employees. Unethical behaviour by employees may refer to the behaviours by employees which negatively affect the organization itself, the customers, the community or the organizational stakeholders. Among the unethical behaviours could be production of goods which are not safe for consumption as well as other behaviours that destroy the environment. The Federal Sentencing Guidelines for organizations prevents such behaviours hence helps in maintaining a sustainable environment. This is similar to the CERES principle objective of maintaining a sustainable environment and ensuring that organizations engage in corporate environmental practices (Ferrell, Fraedrich& Ferrell, 2013). Both the CERES principles and the Federal Sentencing Guidelines for organizations indicate that organizations should act responsibly in ensuring that it complies with its standard. This is to be achieved through use if internal auditing systems which will help in detection of any misconduct. They both provide that the organizations should have reporting systems which give the employees, customers and other agents to report any form of misconduct (Unger, 1995). Both the CERES principles and the Federal Sentencing Guidelines for organizations advocate for sustainable organizational leadership. Under the Federal Sentencing Guidelines for organizations, leaders must be in a position to control the behaviour of the organizational agencies and employees. On the other hand, under CERES principles, leaders should in a position to control the organization so as to ensure corporate environmental practices. The CERES principles and the Federal Sentencing Guidelines for organizations differ in a number of ways. First, the Federal Sentencing Guidelines for organizations provides that an organization that behaves in a manner that is not ethical should be punished. It goes on to even identify some of the punishments that should be imposed on such organizations. On the other hand, the CERES principles does not provide for any punishment of an organization that does not behave in a manner that is not friendly to the environment. The principles only outlines the way organizations should behave so as to ensure sustainable environment (Biegelman&Bartow, 2012). Secondly, the Federal Sentencing Guidelines for organizations applies to almost all the organizations in the United States of America. All organizations in the country should behave ethically. Failure to do so, they will face penalties as provided by the Federal Sentencing Guidelines for organizations. On the other hand, the CERES principles only apply to organizations which are members. Membership to CERES is voluntary. Organizations can choose to join or not to join CERES. In fact, it is composed of about 100 companies. The other difference is that for an organization to be a member of Federal Sentencing Guidelines for organizations there is no subscription fee involved. Organizations do not pay any money and therefore no extra cost. The Federal Sentencing Guidelines for organizations is actually controlled by the government. This is opposed to membership to CERES where organizations have to pay a membership fee plus annual subscription. Membership to CERES principles is categorized into two. There are the coalition members and the endorsers. The former are the institutions that consider environmental factors explicitly before making their investment decisions (Biegelman&Bartow, 2012). The later refers to any other businesses and organizations offer their commitment to the CERES principles with the aim ofassisting in environmental sustainability and identify opportunities which would contribute to their sustainable development. Question 3 CERES reports CERES prepares reports every year. The reports have been documented since the year 2002 to date.It is important to note that there is no standardized environmental reporting. In fact, most companies that has environmental reports do it voluntarily. However, CERES reporting became the first standardized corporate environmental report with a formal format (Ceres, 2010). The report was created in collaboration with the Fortune 100 companies, institutional investors, progressive smaller companies, and other large environmental organizations. The reports are prepared in two distinct formats. The two different formants were developed in order to accommodate differences that exist in company characteristics and environmental concerns. The first format is the standard format. This is meant for companies which have revenue exceeding $25 million. The organizations that report using these format are mostly the manufacturing companies especially those that use large quantities of resources, those that have complex production processes, those that use chemicals as well as toxic substances. The second format is referred to as the short form. This format is for those companies which are not involved on manufacturing activities as well as other smaller companies. These are companies which do not use a lot of resources. In addition, these companies do not cause so much damage to the environment. Whether a company uses the standard format or the short format, they have to report according to the information and the order requested. They should maintain the section titles as required.A company that wishes to deviate from the format should do so on request which is granted by CERES Report Committee. Both the standard form report and the short form report should include the company’s profile. This includes the activities that the companies conduct, the formation of the company, its directors, as well as its category and its brief history. Location of the company should be included. This includes the location of the company’s headquarters as well as the location of its branches if any. In addition, both the standard and the short form reports should include the policies that the company has adapted ensure environmental friendly practices. Organization and management policies should also be included in both reports (Reinhardt, 1999). All companies regardless of the business they conduct are required to ensure and maintain workplace health and safety. It is for this reason that CERES requires that both the standard form report and the short form report should report on workplace safety and health.They should also include details on the company’s corporate social responsibility. Both the standard format and the short format reports should show the company resource consumption and conversion. This enables CERES to understand the magnitude of environmental damage, degradation and pollution caused by each company. CERES can then be able to develop strategies that each company should adapt so as to minimize the environmental issues resulting from its resource use. Related to this is the reporting on emissions and waste. Companies need to report on their level of emission as well as waste production regardless of the reporting format they use. Compliance is the other similarity that exists between the two formats. Each company needs to report on its compliance to the environment control strategies. It should outline its priorities and the challenges it faces in carrying out its activities (Unger, 1995). The reason for the two formats by CERES is that the member companies are different in terms of scope of activities, resource consumption, waste production as well as revenue generation. Therefore, CERES developed these two formats so as to accommodate these diversities. Smaller companies report using the short form while larger companies report using the standard form.There are investor reports as well as the company reports. Each of these adapts either of the formats depending on the company.Both the investors report and the companies report address the performance of CERES in dealing with environmental issues (Ceres, 2010). The investor reports will report on how the organization has used the money by investors to address the environmental issues. The reports to companies on the other hand will report to the member companies on how the CERES is addressing the environmental issues to ensure sustainable development of member companies (Ceres, 2010). Question 4 Global Reporting Initiative Pilot Program The Global Reporting Initiative (GRI) is a pilot program that is composed of a number of pilot versions. Prior to the release of the G3 guidelines in the year 2006, a pilot version of the sector supplements were first developed. The version was developed on the basis of G2 guidelines. The organizations in the following sectors can use the pilot programs on top of the G3 guidelines; automotive, logistics and transportation sector, public agency as well as telecommunications (Global Reporting Initiative, 2012). They are pilot versions under which organizations in those sectors should report. Despite the fact that these program is not yet complete, the pilot versions can be useful in organizational reporting. The G3 guidelines which followed the completion of G2 guidelinesare composed of two parts. These are part 1 and part 2. The former gives guidance on how the organization is supposed to report.The later guides the organization on what they are supposed to report. Focusing on what should be reported; it should be in the form that discloses the approaches by the management as well as the performance indicators. Performance indicators are divided into three categories. These include the Economic, Social and Environmental categories. In addition, the social category can further be sub divided into four sub categories which include; product responsibility, labour, society and human rights. The performance indicators are influenced by the indicator protocols. “Indicator Protocols provide guidance on how Disclosures on Management Approach and Performance Indicators should be reported.” (Global Reporting Initiative, 2012) It is after the G3 guidelines that the automotive, logistics and transportation, public agency and telecommunications versions were developed. These were followed by the development ofApparel and Footwear pilot version which was also on the basis of G3 guidelines. This pilot version was released in the year 2008. The supplements indicators of this pilot version are significant in reporting for organizations in the related factor. They provide the organizations with GRI’s G3 Sustainability Reporting Guidelines that is more tailored (Global Reporting Initiative, 2012). The issues covered in the apparel and footwear pilot version include; supply chain standards, employees’ wages and working hours, energy and material consumption by organizations, labour and management relations as well as the strategy developed by organizations for community investment. Since its inception, the pilot program has been successive in that reporting by several sectors can be done using the program. Sectors which are related to the pilot versions can now report using the guidelines. In addition, following the launch of G3 guidelines, the number of sustainability reports developed by organizations has increased significantly (Global Reporting Initiative, 2012). Generally, the GRI sector supplements have been of much benefit to organizational reporting. However, before the GRI program is launched, there are some areas that might need to be improved. First, under the G3 guidelines, the performance indicators relating to environment can be sub divided into more sub categories so as to address specific issues affect the environment. As it is now, the category is generalized. There are some environmental issues which are specific to certain organizations. If the category is sub divided, it can be well positioned to address all the issues relating to the environment. Secondly, the pilot versions do not cover all sectors. They put more emphasis on the sectors they related to. They should be expanded to cover all sectors. This will be helpful in improving sustainability in all sectors and hence in the general society. In conclusion, the environmental issues need to be addressed by all stakeholders. Business organizations are more influential when it comes to environmental issues and they should therefore be fully committed in addressing environmental problems.They should adapt to practices that are environmental friendly. This will indicate their social responsibility. To enhance business commitment to environmental issues, there should be standardized reporting by organizations. The GRI project would be successful in improving organizational reporting. References Biegelman, M. T., &Bartow, J. T. (2012).Executive Roadmap to Fraud Prevention and Internal Control: Creating a Culture of Compliance. Hoboken: John Wiley & Sons. Ceres, (2010), CERES Reports; CERES; Retrieved from < http://www.ceres.org/resources/reports > on January 2, 2013 Ferrell, O. C., Fraedrich, J and Vaughn,G. (1998) “The Wreck of the Exxon Valdez,” in Business Ethics: Ethical Decision Making and Cases, 5th ed., Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2013).Business ethics: Ethical decision making and cases. Mason, OH: South-Western/Cengage Learning. Global Reporting Initiative, (2012), Sector Guidance in pilot version, Global Reporting Initiative, Accessed online from < https://www.globalreporting.org/reporting/sector-guidance/pilot-versions/Pages/pilot-versions.aspx > on January 2, 2013 Reinhardt, F. L. (1999). Bringing the Environment Down to Earth.Harvard Business Review. Retrieved from on January 2, 2013 Unger, C. (1995). Environmental Corporate Reporting: Do We Really Need a New Standard? Total Quality Environmental Management.5(1), pp. 77–82 Walley, N. &Whitehead, B. (1994).It’s Not Easy Being Green, Harvard Business Review,retrieved from on January 2, 2013 Read More