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.

Economic

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)

Environment

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)

Social

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).

3. METHODOLOGY

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)

3.1.2 Stakeholders.

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