Background
The recent rise in concern for the effects of industries on environment is far from being groundless – according to the state-wide statistics, the annual rate of CO2 emissions rose by 2% 2014 (“US Carbon Emissions Rise 2%” par. 1) (Fig. 1).
Figure 1. CO2 Emissions Increase
Source: “U.S. Greenhouse Gas Inventory Report: 1990-2013” (Table 3)
Transportation, i.e., pollution with CO2 emitted by cars, takes the second place in the state-wide pollution rates, according to the chart above (Fig. 1). As the table below shows, very little success has been made in the reduction of CO2 emissions (Fig. 2).
Figure 2. CO2 Emission Rates in the USA in 2010–2014
Source: “US Carbon Emissions Rise 2%” (Table 1)
The few changes that have taken place despite the abuse of natural resources need to be attributed to the use of hybrid cars (Hybrid and Plug-In Electric Vehicle Emissions Data Sources and Assumptions par. 2). Researches show that hybrid cars, in fact, allow for a major reduction in CO2 emission rates, seeing that a hybrid vehicle requires only “24 pounds of CO2 equivalent per gallon” (Hybrid and Plug-In Electric Vehicle Emissions Data Sources and Assumptions par. 4).
Introduction
Corporate social responsibility refers to all the activities that organizations undertake towards improving the welfare of the people where they serve. Corporate entities operate as responsible citizens by undertaking numerous activities with the goal of making profits. Such activities can affect the society positively and negatively.
In recognition of the impact of corporate entities on the society, many organizations have put in place important measures for ensuring that they not only gain from the people through profits, but also give back to the society, to improve the lives of the people they serve. However, other CSR activities are deeply enshrined in an organization’s business.
They relate to the dedication of the organization towards an improved society through its activities. For instance, an organization that focuses on providing food products can carry out CSR activities by ensuring that the products offer important healthy benefits, as opposed to increasing lifestyle diseases or other related conditions that such foods can be associated with.
Another example of corporate social responsibility activities that are directly linked to businesses include the gradual improvement of electronics by a company to be more power efficient such that it can help the world in the push towards better energy-efficient and conscious world (Megumi and Takehara 3).
While CSR activities are always well intended, the outcomes of such activities vary from one activity to another and/or from an organization to another. This paper analyzes the hybrid car project, which is one of the most successful CSR activities by the Toyota Motor Corporation in terms of the positive impacts that the activity has had on societies and the business.
Toyota Motor Corporation
Toyota Motor Corporation is the world’s largest automobile maker and the 12th largest corporation in terms of market capitalization in the world. In 2012, the company became the first automobile that produced more than 10 million cars in a year (Racz, Muntean and Stan 438). The company has retained this position up to date.
The business makes various models of cars, including SUVs, saloon cars, pickups, and trucks. The company has also invested widely in other automobile companies such as Daihatsu, FAW, Fuji Heavy Industries, and Isuzu among others, thus making it truly a globally significant and magnanimous automobile company. With revenues exceeding USD$ 252 billion as of the 2014 financial year, the Toyota Company is a highly profitable establishment.
It employs more than 330,000 employees in its plants and offices in Japan and across the world. As a responsible citizen, the Toyota Company has been at the forefront in advancing important projects that are aimed at improving the lives of the people it serves. As a business that is dedicated to making the transportation of people and goods easy through automobiles, the company has invested heavily in technology as a way of ensuring that its automobiles meet the customers’ needs at all times while at the same time guaranteeing that the clients get value for their money (Ghosh and Chitra 81).
CSR activities are mostly important in ensuring that the company can achieve credibility and customer loyalty. They are a good approach to confirming that the company uses its resources well to ensure that customers receive the best automobiles within their budget. In 2014, the company established the structure below where several officials were given strategic posts to work in collaboration with other stakeholders in addressing the company’s CSR issues.
Figure 3. CSR activities
Source: (Vogel 5)
For instance, in the world that is marked by increasing concerns about energy consumption and efficiency, the company’s technologies, research, and development have allowed it to produce some of the most fuel-efficient and affordable car designs in the automobile industry (Lindgreen and Swaen 3). This customer-focused business strategy can be viewed as an important CSR activity.
On the other hand, the company has undertaken numerous projects that are not directly linked to business and profitability, but also on the general improvement of communities. For instance, the company as carried many CSR activities that are focused on funding education in developing countries among other activities in the regions where it has operations across the world.
Hybrid Cars as a the Most Successful CSR by the Toyota Company
In a world where environmental consciousness has been more important than any other time, companies around the globe are required to exercise their role in a manner that will not contribute towards environmental degradation, but instead promote technologies and activities that will guarantee environmental protection and sustainability.
With the advent of mass production due to industrialization and the increasing population, industrial pollution because of human activities is the main contributing factor towards environmental undertakings that endanger the stability of the world’s environment. Greenhouse gases such as carbon dioxide, methane, and the hydrofluorocarbons (HFCs) are some of the most lethal environmentally degrading gases whose effects have been felt through global warming and its effects on the international climate (Barnea and Rubin 73).
One of the most contributors towards these greenhouse gases is the motor vehicle or automobile industry, which produces lethal combinations of gases through exhaust gases to the environment. This situation contributes to global warming and consequently environmental degradation. Currently, more than 1 billion cars roam the streets of the world.
Each car has its gaseous emissions, which add a share of greenhouse gases that are increasingly contributing towards global warming of the environment. Currently, the transportation sector, which is dominated by the automobile sector, accounts for more than 31% of the 30 billion metric tons of carbon dioxide that are emitted from human activities (Hopkins 34). Indeed, the emissions are increasing.
It is expected that if proper strategies towards the reduction of greenhouse gasses are not implemented through strict policy and legislation changes, the effects of greenhouse gases will make the environment almost inhabitable by 2050. The pie chart below shows the carbon emissions in the world based on the source using the 2014 estimates.
Figure 3: Chart Showing Carbon Emissions by Source
Source: (Hopkins 34)
The transportation sector takes 31%, which indicates a significant amount carbon emission into the atmosphere. In the wake of the dangerous phenomenon that the global warming is threatening to cause, many lobbyists and government agencies have put protracted measures towards reducing the usage of gasoline, which is a major cause of the gases that are emitted from industrial activities and automobile industries (Hopkins, 35).
The Toyota Company has been at the forefront in ensuring that it produces environment-friendly vehicles. Through such an approach, it has managed to reduce the gas emission to levels that the earth can cope with in order to ensure the sustainability of human activities and the environment. Many terms such as energy efficiency and fuel switching have been used to refer to environmental sustainability and responsiveness.
Carbon capture, sequestration, and energy conservation have emerged to provide an important opportunity through which environmentally degrading gasses and emissions can be reduced or controlled. In recognition of the need to put the world on a path towards environmental sustainability, the Toyota Company has invested heavily in cars that have better fuel efficiency and low emissions.
The company has invested heavily in delivering family-sized cars to the masses. Besides, based on the technology of fuel switching, the company has allowed a room for the switching of the car’s engine between gas and electricity, hence reducing the amount of fuel that is consumed per mileage and consequently decreasing the amount of emissions to the environment (Barnea and Rubin 74).
The Toyota Company’s most fuel-efficient and environmentally friendly cars are referred to as the hybrid cars, which have been at the forefront in revolutionizing the automobile industry towards environmental protection. So far, the company is the world’s leader in the manufacture of hybrid cars, which are majorly in two models, namely, the Prius and the RAV 4 EV. To date, the Prius is still in the production process while the RAV 4 EV was discontinued in 2003.
A brief history of Prius shows that the car was first mass-produced from the general market in 1997, following more than two years of intensive research and fine-tuning of the hybrid technology that incorporated gasoline and electricity. At the time, the Environmental Protection Agency (EPA) had put forward new guidelines for what a fuel-efficient and environmentally friendly car ought to have been in terms of emission and fuel consumption (Lindgreen and Swaen 5).
The Toyota Company was the first to meet these new guidelines. It was also the first to claim the first automobile ever to produce a hybrid car for the masses. It adopted a technology that was way ahead of its time as evidenced by the number of years it took other companies to begin mass-production of hybrid cars to the market (Lindgreen and Swaen 3).
As of 2014, more than 4 million hybrid cars of the Prius design by the Toyota Company have been sold, thus making the car the most successful hybrid car in the world, accounting for 67% of all the sales of hybrid cars in the world. This move is a major success story when it comes to upholding CSR goals of safeguarding the environment.
When the company launched its first hybrid car in 1997, the move was a clear sign of its dedication to providing the world with cars that were not only fuel-efficient but also environmentally friendly. Hence, this period ushered in a new era where a motor company was for the first time taking an important corporate social responsibility of ensuring that its activities did not come at a heavy cost to the global community (Racz, Muntean and Stan 440).
In the year that followed the launching, Prius was voted the car of the year in Japan. The award was a clear sign of the recognition of the positive impact that the company was dedicated to having on the society. The car’s 1.5-Litre engine could clock 50 miles per gallon (mpg). This fete had not been realized on a commercially available car.
The car also used electricity power, which would be alternated with the gas, to make it the first car to use this fuel-switching technology on mass-produced cars (Ghosh and Chitra 85). After gaining popularity in Japan, the company extended this significant social responsibility beyond the borders. In fact, it began exporting the car in 2000 to global enthusiasts who were eagerly waiting to land their hands on the car. It became an internationally popular car.
Its success fuelled the Toyota Company to invest even more towards the development of new-generation models of the car. In 2003, the second-generation cars of the Prius model entered the market. It combined major improvements that strengthened the Toyota Company as a world leader in hybrid cars in terms of their popularity, profitability, and environmental friendliness.
While still maintaining the same gas capacity of 1500cc, the new model had a better battery output capacity that reached 50kW and hence a better performance of the car when using electrical charges to power itself (Ghosh and Chitra 84). In 2007, the company reached a major milestone where more than 1 million hybrid cars had been sold in the car’s short history of 10 years.
The third generation of Prius hybrid cars debuted in 2009 with major improvements in energy consumption and gas emissions. For instance, the car, which then had an improved 1800cc capacity, had a better fuel efficiency of 72 mpg and a gas emission of only 82 grams per mile (Hopkins 39). This advancement was highly environmentally friendly.
After concentrating on the Prius model since 2010, the company has launched new models of hybrid cars, which are in line with its goal of being the leading car manufacturer of environmentally friendly cars in the world. Although other models of hybrid cars have come up from other automobile companies, the Toyota Company’s hybrid cars account for more than 67% of all the world’s hybrid cars (Racz, Muntean and Stan 441).
Despite the fact that new models have emerged, the company has been instrumental in showing that the hybrid cars are the future of automobile industry and that other companies will have to follow suit if they want to remain relevant in the increasingly environmentally conscious world of today.
So far, in the footsteps of the Toyota Company, other companies have followed with their models. From 53.7 million hybrid cars in 2009, it is anticipated that over 80 million such cars will be on the roads as shown below.
Figure 4: Hybrid Cars Numbers 2009-2020
Source: (Racz, Muntean and Stan 441)
Toyota CSR Impact on Its Value
While the Toyota Company may have been driven by the need to develop a new technology that will promote better environmental friendliness of the car models, such an excellent move has acted to increase the company’s profitability and reputation.
Through its hybrid car models that cover at least six car models, which include Avalon Hybrid, Camry Hybrid, Prius, Prius V, Prius C, and the Prius Plug-I, the company’s hybrid line of cars is the most successful in the world (Ghosh and Chitra 82). It has positively influenced the company’s profitability and revenues. In 2013, the company accounted for 80% of all hybrid sales of cars in the global market.
At the company’s level, the hybrid cars accounted for more than 14% of the total car sales at the company (Racz, Muntean and Stan 439). This figure is expected to rise to 30% by 2020. The impact of the hybrid cars on the Toyota Company in terms of its value has been significant. The achievement has placed the company as a leader in the automobile technology that focuses on fuel efficiency and environmental friendliness as per the EPA guidelines.
The popularity of the car in both the domestic and international market is a clear sign that customers around the world view the company’s cars as more environmentally friendly and fuel efficient as compared to other models that are available in the market. Generally, the company’s hybrid cars have allowed it to be viewed as highly dedicated to the development and implementation of more fuel-efficient cars that are also affordable and responsive to the needs of the customers, as well as the changing world of environmental enlightenment.
Apart from the high reputation, the company has achieved high levels of profitability and production capacity, with more than 10 million cars being sold in 2012. This record is yet to be broken by any other company in the automobile industry. A good CSR does not just give value to the community, but also to its shareholders.
There is no better way to explain this claim other than using the Toyota Company as a working illustration. With a market share of more than 67%, the Toyota’s hybrid cars account for approximately 14% of its revenues. This figure is expected to rise to 30% by 2020. The company sees a strong future in its hybrid cars based on their high efficiency, credibility, and the company’s superior image in the sector (Ghosh and Chitra 84).
While this marker is rapidly changing with new entrants, as well as the reducing popularity of the hybrid models due to the low oil prices that are prevailing in the market, the Toyota Company’s hybrid will continue to be popular to the extent of creating more value for the company in both the short-term and the long-term.
The company’s investment and continued research on technology, research, and development has allowed it to be a pacesetter in the world, which is becoming increasingly environmentally conscious while calling for accountability of corporate entities as far as the impact of their activities on the environment are concerned. Overall, the company has done a commendable job that other organizations should emulate, especially in terms of balancing between profitability and benefiting the general society.
Relationships with Stakeholders at Toyota
According to the statement issued by the organization, managers in Toyota aim at satisfying the needs of customers in the first place, following the “Customer first” and “Genchi Genbutsu” principles (Relations with Stakeholders par. 1). However, it would be wrong to claim that the organization abandons its staff in pursuit of increased customer satisfaction rates – instead, the firm prefers to develop an elaborate strategy allowing for staff satisfaction and motivation.
The above-mentioned approach is based on recognizing the significance of diversity in the workplace: “Toyota is working to develop human resources by seizing times of adversity as opportunities to learn, planning greater enhancement and reinforcement of educational programs” (Relations with Stakeholders par. 11). As a result, the number of workplace conflicts is reduced to minimum. The specified strategy aligns with the principles of CSR, therefore, helping increase the corporate value significantly.
Stakeholders and corporate activity
Inside the company
According to the official statement issued by the organization, being a “good corporate citizen of the world” (Relations with Stakeholders par. 25) is currently identified as the goal of every corporate activity carried out in the company. When combined with the CSR principles, the notion of corporate citizenship helps establish the idea of social responsibility on a global level.
The specified factor affects Toyota in a very strong manner as far as the company’s long-term development is concerned, since it helps build trustworthy relations with every single stakeholder involved.
Outside the company
As far as the corporate activity outside of the organization is concerned, the organization clearly respects its shareholders and is willing to create strong ties with the latter. The concept of CSR seems to be the key tool that allows for the promotion of improvements in the production process and the principles of organizational behaviour.
By introducing the staff to the concept of CSR, Toyota has designed the framework that sets proper corporate ethics and, therefore, provides the staff with the behavioural model that triggers increase in both staff motivation and customer satisfaction (Morck 297). As a result, the community receives a significant value due to the increased efforts of teh staff and thepromotion of teh CSR principles in the workplace.
Goods and service dealers
Although customers are the prime focus of Toyota, the relations with goods and service dealers also essential to the firm’s operations; therefore, Toyota provides support for the specified stakeholders as well. While admittedly time-consuming and requiring active use of the company’s resources, the specified relations are likely to be of good use for Toyota, as the company may need support in the instances of a financial or any other type of crisis.
Global societylocal communities
As it has been stressed above, being a part of the global community, Toyota has a major concern for the impact of its production processes on the environment and health of the global community members. In other words, the company bases its innovative solutions on the current needs of the global community, such as the need to develop a sustainable approach towards the use of natural resources.
Stakeholder agent (NPO, NGP, government)
According to the analysis of Toyota’s current policies carried out above, the organization seeks cooperation with major stakeholder agents; however, the organization does not seem to favour the idea of the government interfering the company’s processes and prefers to maintain full control over the latter (UNEP Finance Initiative 25). The specified approach seems rather reasonable, as Toyota’s leader needs to take the decisions that have a positive effect on not only the target population but also on the firm.
Stakeholders and Long-Term Development
The approach adopted by the organization towards managing relations with its key stakeholders affects the connection between the latter and the firm to a considerable degree. Specifically, the principles of customer satisfaction and staff motivation, which Toyota employs in its daily routine, facilitate long-term relationships with the aforementioned stakeholders and foster the environment, in which trustworthiness between the company and its stakeholders may exist.
As a result, the current partners are likely to maintain a contact with Toyota for several years. Moreover, the approach chosen by the organization helps invest into the organization’s employees and partners, allowing for professional growth of both (Jensen 39).
Long-Term Development and Corporate Value
The corporate values that Toyota has created can be viewed as the key driving force behind the organization’s progress. At first glance, the values that the organization seem rather typical for a company of a global scale; however, a closer look at the subject matter will reveal that the company’s ethics incorporates a very unique component.
By explaining the switch from producing traditional petrol cars to making hybrid ones, the company made a very powerful statement concerning the wellbeing of the stakeholders involved; as a result, the newly acquired corporate value, which concerned caring about global health and environment, was transformed into one of the key premises for the company’s ethics to develop on.
As Toyota switched to the principle of global wellbeing as the basis for its corporate ethics, the value of the organization seems to have increased several times. The phenomenon in question can be explained by the fact that it transferred to a new level of social responsibility, i.e., the stage, at which it views not only the target customers, but also the entire population as its stakeholders. With the acquisition of new responsibilities, Toyota has reached a new level of credibility that has increased its corporate value significantly.
Conclusion
Corporate social responsibility activities allow an organization to give back to the society by either providing products that benefit the organization while at the same serving customer needs in a responsible and effective manner or providing an assistance that goes towards elevating community’s problems or challenges. In other words, the CSR allows an organization to be a responsible member of a community by contributing positively to the betterment of the public where possible.
However, while the CSR activities are good intended, the outcomes of such activities vary from one organization to another and/or from one activity to another. As a global automobile company, the company operates in an environment where automobiles have been blamed for the increasing gas emissions that are causing global warming, which has been affecting the environment.
As a responsible citizen, the company has invested heavily in the availing of hybrid cars to masses. These cars are highly fuel-efficient. They combine the use of gas and electricity, thus ensuring more fuel efficiency and environmental friendliness. Concisely, the company’s hybrid cars are an important example of a successful CSR activity, which has had a significant impact on the company’s reputation. The activity has increased the company’s value to become the world’s largest automobile maker.
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