Environmental Policy and Business Concerns - Essay Example

Bravo: Report on environmental policy Bravo: Report on Environmental Policy and Business Concerns 0 Introduction Our company’s environmental policy has served us well since its adoption and has been a major driving force in all our creative activities. Our President and CEO has been stressing the integration of environmental work into all of our processes as a key competitive factor. Not surprisingly, our company has secured a fair share of the market, earned kudos from the customers for the quality of our products and services, apart from being regarded as a responsible corporate citizen in public perception. Such favourable endowments, as is well recognised in all businesses, are transient in nature unless they are sustained by continued efforts in line with local and international developments. This report analyses the business concerns of Bravo in the light of the significantly enhanced international focus on environmental issues, our initiatives in this regard and suggests a road map for future. 2.0 Strategic implications of policy and initiatives It is appropriate to recall the company’s environmental policy which reads: Bravo shall achieve and maintain leadership within its field of competence in order to provide a better environment. Bravo shall by foresighted research and development continuously reduce the environmental impact coming from its production, products and services. Bravo shall actively promote internationally harmonised and effective environmental legislation – for Bravo, current legislation is the minimum standard. Bravo shall increase the confidence in its environmental work through openness and regular environmental reporting. This policy and moves initiated under it have strategic implications as discussed below. 2.1 Investments: Bravo’s research and development (R&D) work stems from this policy guideline as well as its strong belief that better environmental products and services are its competitive factors and not a source of unnecessary expenditure. The policy enjoins the company to achieve and sustain leadership position – in other words, continued investments in R&D work. Bravo’s initiatives include engine efficiencies, aerodynamics improvement, reduced road drag factors, weight reduction and use of eco-friendly alternative fuels such as CNG. All these initiatives have a direct impact on the competitive position of the company in view of the investment costs and time/effort spent. These will also have a direct implication for the company’s bottom line (nett profits) unless the results achieved generate more business volumes or higher value addition or both, and costs are kept under check. To assess the prospects of higher business volumes or value addition, it is appropriate to examine the market situation for Bravo products and services. 2.2 Traffic volumes and changing market character: It has been seen that during the past 3 decades, the growth of road traffic has far outstripped that of rail traffic, although the latter enjoys the support of environmental activists. In the European Union zone alone, the road freight volume is expected to double to 16.5 billion tonnes between Bravo: Report on environmental policy 2 1990 and 2010 (Brooks, I. & Weatherston, J. 2000, pp.1-6). Since business growth is thus assured, the question remains whether Bravo can sustain and improve its market share in truck sales in the face of competition on the one hand and enhanced investment costs on the other. Securing acceptance for the higher capacity trucks that the company is proposing is important for the leverage it gives vis-à-vis competition. This is also justified when one considers the changing market dynamics where the importance of small haulage operators is decreasing with corresponding rise in fleet sales to large orgainsations. 2.3 Global trends in outsourcing: In the light of the concerted efforts at international level, auto industry is confronted with rapidly evolving and stricter standards for environmental compliance. Stricter norms of emission control or fuel consumption rates, mandated to be achieved by the defined dates, have been impacting corporate plans and strategies in the industry across the globe. Many of these newer regulations are not in consonance with either the pace or the investment levels contemplated by the automakers in the normal course of their R&D activities. Costly, as they may appear to the industry, these investments are inevitable and to that extent, Bravo has been wise in its foresight and development efforts. However, to sustain competitive position even while investing in future models of engines and truck bodies, Bravo needs to exploit technology to the fullest extent and by ‘technology’, one refers to the information technology and business process outsourcing that have been sweeping businesses in the recent past. Strategically, for Bravo and for other truck manufacturers as well, the world is a single market both for its products and for sources of supply – supply of components or services. On the basis of this development, auto industry has been shifting its production bases from the highly industrialised nations to the developing nations. Since the production process itself is a source of pollution, this shift positively impacts the environment in the old auto towns, although does not eliminate it altogether from a global perspective. Bravo’s current operations mainly in Europe and Latin America need to be expanded to the emerging markets of Asia either through outsourcing or even through setting up manufacturing bases there. 3.0 Consequences of potential partnership or collaboration between Bravo and other parties In today’s world it is no longer possible for a business to operate in isolation or to ignore public concern for environment. In the case of auto industry, which is regarded as the main villain of air and noise pollution, it is well neigh impossible. This situation leads us to examine the role that can be played by our potential partners, which would enhance our business sustainability and performance on the environmental front. 3.1 Potential parties: Governments, competitors, suppliers and public are the parties that have a concern as to how Bravo tackles environmental issues while doing its business. In a similar manner, Bravo’s business itself is at all times influenced by these parties, among other factors. 3.1.1 Governments: Scandinavian truck manufactures have a stake for sustaining competitive position in the world market in view of the global operations of companies like Bravo. Governments negotiate with industry associations on matters concerning the industry as whole, for example on the new environmental norms, rather than with individual members. European Union governments have successively adopted Euro 1 to Euro 4 norms and are now moving to implement Euro 5, the strictest norm till date and Bravo has been Bravo: Report on environmental policy 3 keeping pace on all these improvements. In order to address the growing public concern on traffic congestion, Bravo and other truck makers have also been pushing governments for acceptance of 48 t capacity trucks in place of the existing 40 t limit in Europe. In UK, the Freight Transport Association estimates elimination of nearly 9000 smaller trucks from the roads and annual saving of 300 million litres of diesel fuel if the truck sizes are allowed to be increased by 10% - from 40 to 44 t (Brooks, I. & Weatherston, J. 2000, pp.1-6). Thus, the two-way co-operation with governments helps the industry to remain competitive even while addressing environmental problems caused by road congestion and increased fuel consumption. By its historic attention to these issues, Bravo is in a leadership position to set the tone for these efforts and this should serve it well in days to come. Similarly, since rail movement of goods is more favourably viewed by environmentalists, Bravo can collaborate with the concerned governments to develop a scheme of combined rail and road movement, whereby appropriately designed trailers can be taken to special loading platforms for direct placement on trains and onward movement, much like the container services already in operation worldwide. 3.1.2 Competitors: Coming to partnership with competitors, one area for collaboration was noted above as obtaining approval for higher capacity trucks, being an area of common concern without losing out competitive edge. Similarly, development of common dismantling and recycling facilities (just as in the case of common effluent treatment plants for industrial estates) among a few major truck manufacturers can help to address both environmental and sustainability issues. There are economies involved here, apart from the favourable impact on public. Recycling reduces the exploitation of natural resources and hence is a major feature of sustainable growth. Bravo’s performance rating on its environmental policy will be inevitably tied to its recycling policy as much as on its efforts to build better engines or truck bodies. 3.1.3 Suppliers: Auto industry is characterised by the thousands of components that go into the assembly of the final product and outsourcing of components is an established phenomenon, world over. Bravo’s environmental policy is thus automatically extended to its suppliers in a binding way and covers all areas including recycling and reusability. In this age of technology and outsourcing, Bravo should enforce strict observance of its environmental policy by potential new partners / suppliers – be it in terms of product design, process development, or component supply. A consequence of this approach will be the eventual leadership for Bravo in generating and sustaining internationally accepted standards and hence is good for its business. 3.1.4 Public: As users, the public pass the ultimate judgment on a company’s products and services. While the clamour against agents of air and noise pollution continues to be heard in higher decibels, Bravo should publicise its environmentally responsible activities in a collaborative way with the public. Public perceptions are important for success in the market place and positive images enhance the brand value of a company. Finally, Bravo has been pressing at various national and international forums for universally harmonised standards for measurement of pollution. Progress in this area has been rather slow and co-operation with governments, competitors, and public would help in achieving this objective. Bravo: Report on environmental policy 4 4.0 Relevance and mechanisms for promoting and publicising the social dimension of Bravo’s value proposition A company’s brand value is a source of satisfaction for its employees. Brand value is created both by the success of the company against competition in the market place and by the public perception of its business policies and ethics. One of Bravo’s strong points has been its environmental policy that has always exceeded the minimum legislative requirements of the day. That Bravo chose to anchor its competitive position on its environmentally proactive actions and achieved success has been a matter of record. At the same time, the reputation that Bravo trucks are the Rolls Royce of truck industry at once confirms a certain quality and corporate image, commanding premium value in the international market. This amalgam of premium value and socially responsible business practice is rare and hence is most relevant for Bravo. Bravo chose to promote this value proposition in a number of ways to cater to the internal and external needs. In the first place, by proclaiming a sweeping environmental policy that clearly defines the direction, objectives and action path, Bravo has successfully communicated to employees at all levels of the company. Its R&D efforts have been highly successful in bringing out engines with reduced emission, trucks with better aerodynamic bodies of lesser weight, and vehicles that consume lesser fuel per tonne-km of hauling. Operating under this policy, the company has also met and exceeded current legislative requirements on product performance through the various periods and has built a brand image that is the envy of competitors. Internally, these developments are easily recognised and appreciated at all levels of employment. By championing the cause for harmonising the methods of testing emissions or pushing the EU governments for permitting higher tonnage trucks or co-operating with other major competitors to set up common dismantling and recycling facilities, Bravo has given weight to its voice externally. Its annual Environmental Reports, prominently report on the achievements in implementing the environmental policy and set standard for the succeeding year. Being in public domain, these reports in turn promote employee commitment to performance on the stated policy. This is the social dimension of Bravo’s value proposition to its stakeholders – its financiers, the government, investors, employees, customers and public at large. 5.0 Recommendations Truck manufacturing industry, being a part of the larger automakers’ world, is subject to continuous public scrutiny and pressure on environmental performance – both for its operations and for the performance of its products. On the one hand, road transport industry growth rate outpaces that of movement by rail, and on the other the increasing concerns on air and noise pollution caused by it are inviting more stringent legislations covering emission norms, fuel consumption, recycling and scrapping methods. Bravo should continue to invest in R&D to maintain its leadership position in engine and truck body design, usage of alternative fuels and enhancing usage of recycled materials. Steps should be taken to contain costs of operation by outsourcing a part of the design, research and development work and as many of the components as possible; in the process, its environmental policy should be explained and acceptance secured. Bravo: Report on environmental policy 5 Bravo should expand its geographical footprint beyond the present regions of Europe and Latin America and set up bases in the emerging markets of Asian region. In association with other major truck manufactures, Bravo should vigorously follow its efforts for establishing harmonised methods of measurement of emission and increasing the truck size limits. Bravo should continue to engage various governments on the need to enhance truck capacities and promoting combined road and rail movement of freight, to get the best of both options. Finally, Bravo’s proactive environmental policy and its achievements should continue to be highlighted both internally as well as to other stakeholders. Bravo: Report on environmental policy 6 References Brooks, I. & Weatherston, J. (2000). The Business Environment: Challenges and Changes. Harlow, UK: Financial Times Prentice Hall. Page 1 of 6. Case study Read More