Business Essays – Responsibility Volvo Company

Responsibility Volvo Company

Corporate Social Responsibility and Sustainable Marketing

I. Background:

According to Volvo (2007a) define that Volvo is wholly-owned subsidiary of Ford Motor Company since 1999 by together with Jaguar, Land Rover and Aston Martin, the company is part of the Premier Automotive Group (PAG) in the Ford’s premium car division. Volvo Cars is a Centre of Excellence for Safety for Ford Motor Company, as well as a Centre of Excellence for Telemetric for PAG. The ‘Volvo’ name is owned by Volvo Trademark Holding AB, which is jointly owned by Ford Motor Company and AB Volvo. Volvo Cars employs a total of about 25,553 people. The company sold a total of more than 427,700 new Volvo cars in 2006. The Volvo Cars head office, product development, marketing and administration functions are located in Goteborg. Its cars are marketed and sold by regional market companies and national sales companies in about 100 countries.

• The plan, development, proposition of the organisation:

The Volvo car production plants are located in Goteborg and Uddevalla in Sweden and Ghent, Belgium. Pininfarina Sverige, Uddevalla is owned jointly by Pininfarina SpA of Italy (60%) and Volvo Cars (40%). Certain components are manufactured at their Swedish plants in Skovde, Floby and Olofstrom, while the company also operates small assembly plants in Malaysia and Thailand. Small amounts of Volvo cars were also assembled at Fords factory in South Africa. In addition, production of Volvo cars also started at Changan Ford Mazda Automobile Co., Ltd since 2006. (Changan Ford Mazda Automobile), Ford Motor Company's passenger-car joint venture in Chongqing, China. (Reference1) In Volvo (2007a), it defined that Volvo had launched the new C30 which is a car for an active lifestyle in urban areas, thus making debut in the segment for two-door premium cars. The sales target is 65, 000 cars a year and 75% of the expected buyers will be in Europe. Volvo Cars also launched Flexi Fuel models powered by renewable bio-ethanol on several European markets during autumn. The green model range is also being extended and even Volvo’s new C30 will be offered with eco-optimised Flexi Fuel power. In Volvo (2007a) its cars Management Team decided to reinforce the organisation and governance processes for environment issues to be better prepared to meet future environmental challenges and thereby further strengthen the Volvo brand. Product related issues are governed by the Environmental Committee within the PSC (Product Strategy Committee). The Environmental Committee is headed by Sven-Erik Svensson and Lex Kerssemakers. It focuses on long term strategic product issues and to improve coordination between Product Development, BBPS (Brand Business and Product Strategy), Governmental, Legal and Public Affairs as well as seeking further synergies within FMC. All non-products related issues are governed by Steven Armstrong and the Environmental Committee within the Operations Committee. This Environmental Committee will as well secure coordination with the above mentioned organisational units. Steven Armstrong and Lex Kerssemaker are also the management representatives for environment in the Volvo Cars Management Team, responsible for reinforcing the core value environment as well as fulfilment of the ISO 14001 requirements. The Volvo Cars overall responsibility for ISO14001 has been transferred from Research & Development to Process and Operational Excellence for improved integration in the Volvo Cars BMS (Business Management System), which already has incorporated the Quality standard ISO 9001. As a consequence of the above, the Volvo Cars Environmental Council is hereby discontinued as well as the role Volvo Cars Environmental Director. In this case, Volvo has 3 different role levels which are carmaker, local player and global player. First of all, as a role of carmaker, Volvo found that their products used to produce noise and air pollution during the congestion, after that they were seek to reduce the problems with ‘sustainable business strategies’, then they developed Lambda sensor, it reduced tailpipe emissions by up to 90%. The Lambda sensor was introduced into Volvo cars in1976 and now it is the standard of the industry. Another invention is the three point safety belt, which is a Volvo innovation that is now standard in every car in the world. Also, Volvo (2007b) describe that their ‘factories use closed water cycles to reduce the consumption of fresh water and are equipped with advanced water treatment facilities, while residual products are treated in an environmentally compatible manner’. Next, as a global player Volvo (2006) suggest that ‘Our reputation allows us to attract expertise from around the world and source the best components that help us build the highest quality cars in the world’ which allow Volvo to produce better cars that are less damaged to the environmental. Furthermore, in 2000, Volvo signed the United Nation’s Global Compact initiative to work for human rights, establish good working conditions, take responsibility for the environment and combat corruption. However, as being the role of local player, the style of Volvo is totally different as global player, Volvo (2006) thinks that employees are the most important stakeholders. They have the ‘responsibility to be an honest, transparent and active company’. They achieve this by ‘being a developmental, ethical and reliable employer, by contributing knowledge, and taking into account our environmental and social impact in purchasing, production and distribution’. Also Volvo provides educational and cultural programmes to employees in an effort to foster the next generation of employees and strengthen the reputation of Volvo Cars. It is believed that Volvo is doing the correct things to build a step moving forward for the future. They educated the employees who enable them to develop, innovated, come up with fresh ideas and to produce quality goods that stick with their achievement which is care more about the environment...

• The factors causing the environmental problem when supplying:

Quality is an expression of our goal to offer reliable products and services. In all aspects of our operations, from product development and production, to delivery and customer support, the focus shall be on customers’ needs and expectations. Volvo’s goal is to exceed their expectations. With a customer focus based on everyone’s commitment and participation, combined with a process culture, our aim is to be number one in customer satisfaction. This is based on a culture in which all employees are responsive and aware of what must be accomplished to be the best business partner. "An automobile is driven by people. Safety is and must be the basic principle in all design work" this is a quote from the Volvo founders. A series of pioneering safety innovations has made Volvo a world leader in automotive safety over the years. The Volvo safety concept has evolved to encompass safety in a broader context - safety in the interaction with others on roads and in work situations, as well as improving comfort and working conditions for drivers and operators. A high standard of safety represents a major contribution to efficient transport. Environmental care is together with quality and safety a corporate value for the Volvo Group. Already in the mission statement, we state that “we use our expertise to create transport-related hard and soft products of superior quality, safety and environmental care“. We all depend on transports and smoothly functioning transportation is one of the cornerstones of modern society. The distribution of daily supplies to people in cities, the trade between companies and the personal mobility are all examples of how dependent we are on transports. Volvo has a responsibility. The issue of what represents good or bad corporate social performance has been the subject of come confusion. This is mainly caused by a focus on activities rather than outcomes of activities that define performance (Woods 1991). The original social reporting movement of the 1970s died a swift death in the face of resistance from businesses who viewed it as another ‘stick’ with which regular alters could beat them. As one of the world’s biggest manufacturers of heavy commercial vehicles, Volvo bears a clear responsibility for reducing the environmental impact of its products. However, a long history of proactive environmental programmes has also provided us with an opportunity of strengthening both our own and our customers’ competitiveness, while contributing to positive societal development. A long tradition of responsible business conduct and consistent effort under the headlines of quality, safety and environmental care form the foundation for social responsibility in the Volvo Group. The Volvo Group can be characterized as a decentralised organisation, but with common values. The approach to social responsibility actions and projects differs from country to country, depending on social security systems and other local conditions. The general reference document for ethical and social issues is the corporate code of conduct, including the issues contained in Global Compact. A new Code of Conduct was adopted by the Board of Directors in June 2003. It updates the old code from 1982 and is extended to be the general reference document for ethical and social issues. Geographically the green challenge forces companies to think internationally and globally to understand the socio-environmental impact of their products, production processes and sourcing policies. Economically it also forces them to think across industry boundaries. It cannot be understood or tackled from a nationalistic or a single across all industries, from those in the environmental implications, was demonstrated when the Code of Conduct is committing to the principles of the UN Global Compact. However the green challenge may also require marketers to abandon many of their preconceptions about their customer, their products and the nature of their market. The green challenge is emphasising the socio- environmental costs of products when marketers are used to focusing on the techno-economic benefits and their role in solving, rather than causing, problems for customers. The problem about what to do with discarded products, which used to be the consumer’s problem, is now a challenge for the marketer. In some cases marketers are actively helping consumers to use less of their products – a very novel concept for marketing. Let make more clearly by the Einsmann’s (1992) explanation how when product managers championed the concept of a refill pack for Protector and Gamble’s Lenor fabric softener: “They had to overcome the conventional wisdom in the company: that the inconvenience of the refill packs would be unacceptable to consumers. Research closed the argument. Once refill were market tested, it was quickly apparent that the inconvenience of refilling… was more than offset by consumers’ satisfaction at reducing the amount of plastic waste that had to be put in the rubbish bag.’

• The values which organisation has chosen to build into their brands in terms of its environmental footprint :

Volvo perceives their company to be at the top of the market in the world of premium cars in terms of their environmental footprint. According to their President and CEO Fredrik Arc, In Volvo (2007c) says that Volvo is to be ranked as a leader in terms of Environmental care amongst the worlds premium car brands. This can be seen to be deemed a fact as in March 2003 Volvo became one of the first carmakers in the world to be awarded global certification under the international environmental standard, ISO 14001. Volvo has produced core values that are safety, quality as well as the environment. Volvo has realized the effect on the environment that they have so taken many measures in order to reduce these negative effects. In an Environmental policy Volvo (2007d) made by their President and CEO Fredrik Arc outlines the targets they want to achieve in order for them to reach their desired level of environmental care. It covers two main key targets to help improve environmental care and has targets for the aims that they want to be achieve for them, these are is stated below;

Energy and resource efficiency

Cutting emission of carbon dioxide and use of resources by:

• Continually improving fuel efficiency

• Increasing the recycled and renewable energy resources

• Increasing efficiency and reducing the production of waste in all their operation.

Health-related technologies

Reducing health and environmental risk caused by personal mobility:

• Developing emission control systems to reduce the impact of Volvo’s vehicles effect of the quality of air.

• Minimizing the use of materials harmful to human health or the environment.

• Avoiding asthma including and allergenic substances in their car interiors

• Minimizing, as much as they can of emissions to the air, water and the soil from their produced manufactured units.

These policy targets are closely related to their values of environmental care and their believed responsibilities Volvo (2007e) and ties into what Volvo states are their corporate citizenship commitment, and their desire to become a responsible corporate citizen. Volvo has in order to achieve their environmental policies strived to make their cars and production methods as environmentally friendly as possible, Which says in Volvo (2007f) that in 1976 they created a Lambda sensor that reduced tailpipe emission by 90%. The Lambda system has now become standard in the industry. They also have amongst the cleanest production facilities in the world. They have significantly reduced the environment effects of car making, by reducing solvent emissions Volvo have also taken in careful practice across all aspect of their aftercare. Volvo continuously are trying to show corporate citizenship commitment as they continue to communicate with stakeholder and show responsibility in movement and the buying of their parts and they use of energy when producing their cars. They continue to look to improve efficiency of their vehicles and this can be demonstrated like their research such as when they produced their Lambda sensor. Volvo focus on making their production methods more environmentally friendly, Volvo (2007g) says they have reduced solvent emission from 30kg/car in the 70’s to 1.95kg/car in 2004. Volvo have reduced, as well eliminated a lot of harmful chemicals that are made in production. They constantly engage with and are trying to sustain their image of being an environmentally responsible organizations and are trying to build upon a good ethical reputation into their brand they say in a statement that enforce their responsibility to the environment and the reason the believe it is so much needed is because quoted from the Volvo website, ‘because if we fail, the brand suffers and ultimately so do our sales’. Volvo closely see their perception to be a ethical company to be a asset to their appeal towards potential customers and so ultimately a great differentiator against other premium car rival companies. But also taking an environmentally friendly act towards their production methods is done also according from Volvo to aid them to achieve a ‘sustainable business strategies’. Basically it can be seen that Volvo uses their environmental approach as a way of them adding value to their products. Volvo has decided to adopt a favourable public image by taking the environmental stance that they have made. Volvo has taken the approach of establishing their environmental footprint approach as a pull factor to customers it will increase demand of their products in certain key market groups. Those who believe that they would want to be part of member groups such as people who believe they are environmentally aware such as members of Friends of the earth and other environmental groups. Also people who would have associative groups that also have a common interest in the environment. Their actions may lead to increased sales from these groups of consumers.

• Product life cycle:

Every product has an impact on the environment throughout its lifecycle, from extraction of the raw materials to final disposal and recycling. For this reason, it is important to study its environmental impact from a holistic, lifecycle perspective. (Volvo k) A new Volvo car is a highly complex product whose environmental impact varies at different stages of its lifecycle. In order to cover the entire lifecycle, the EPI is divided into six main areas. Many aspects of the product's impact on the environment must be considered when mapping the life cycle of a car. The EPI enables us to grasp the entire life cycle, and to measure our progress as we work to develop more environmentally compatible products and services. In this way, we can:

• Show how we, our suppliers and our dealers are working to implement environmental management systems;

• Show how much energy is used to manufacture our cars, the quantity of solvents discharged from our plants and the efficiency with which the materials in the cars are utilized;

• Illustrate the emission levels generated by the cars when they are driven and how much fuel they use. This enables you to compare how much carbon dioxide is emitted and the quantity of hydrocarbons released by the car's fuel system as a whole;

• Specify the quantities of recycled non-metallic materials used in our cars;

• Describe which measures we have taken to develop a healthier in-car environment.

• Recommendation:

In our opinion, Volvo is building the next step a bit slow behind, at the moment, it mainly focus on giving trainings to employees, which will take like 10 to 20 years time to achieve their statement to provide a leading techniques into the car that might lose the chance being a pioneer in the market. Furthermore, Volvo could co-operated with a chemistry organisation to develop a new source which can replace the fossil fuel, if it happened the citizens will not need to pay the petrol as high prices. Furthermore, In the past the customer satisfaction has been judged in terms of the performance of the product at the moment (or during the period) of consumption. An environmentally concerned consumer may reject product because they are made aware of the social or environmental harm that it causes in production or disposal. They may also avoid a product because of the activities of a producer, its suppliers or investors. The UK Green Party recently advised its members to avoid Ecover detergent products, despites their environmental excellence. So now if the Volvo can apply a new concept of customer satisfaction they can satisfy the needs of the customer to identify the new product to target them. Finally, Volvo has a target for trying to ensure that their manufacturing of their cars and the cars they produce doesn’t have too much of a detrimental effect on the environment. They have cleaned up their production methods as well as their engines over the years. But even doing all this there are other ventures that they could more into to help improve their environmental footprint. Many car and manufacturers have done ventures into producing electricity powered cars. These cars would not release toxic fumes that standard cars produce and emit into the atmosphere. Also while it may be expensive they could look more into renewable sources of energy in their factories such as solar and wind power. This would be a much cleaner production method, and less harmful to the environment. While these options are all viable there are expensive and may hamper productivity and may take time to implement.

Appendix: Case study

Our stakeholders include our customers, the communities in which we operate, employees and business partners – through dialogue and active investigation we gain insight into their reality. By identifying what is important for our stakeholders we can develop a complete corporate responsibility picture that defines our responsibilities in terms of our three important roles.

Responsibility as a Carmaker

As a manufacturer of cars we provide personal transport solutions that benefit individual freedom and wellbeing, as well as contributing to socio-economic development. However, Volvo Cars contributes to negative mobility issues such as congestion, noise and air pollution. It is our responsibility to ensure that we seek to minimise the negative impact of our products with sustainable business strategies. We have a long history of developing and incorporating features into our cars that benefit the community at large. One example is the Lambda sensor which, when it was introduced into Volvo cars 1976, reduced tailpipe emissions by up to 90%. The Lambda sensor is now industry standard. Another good example of how we share much of our knowledge is the three point safety belt, which is a Volvo innovation that is now standard in every car in the world. In order to understand our complex reality, it is necessary to constantly acquire knowledge and inspiration from outside the company. For instance, we have taken onboard the conclusions regarding the seven goals presented in Mobility 2030 within the framework of the WBCSD Sustainable Mobility Project. In our role as a carmaker it is crucial for us to identify product issues we need to work with. We achieve this through initiatives such as the Volvo Accident Research Team,

Responsibility as a global company

As a global brand and company we benefit from expanding markets worldwide. Our reputation allows us to attract expertise from around the world and source the best components that help us build the highest quality cars in the world. Through our supply chain network we extend our impact to incorporate our suppliers, their employees and the communities in which they operate. Our supply chain and dealer network provide us with almost global coverage. As a result, our global responsibility extends to everything that we buy and sell. By systematizing our work, we try to ensure that we and our business partners live up to high standards – regardless of geographical location. Our commitment to these issues can be seen in Volvo Cars’ stringent policies in our supplier agreements with regard to environmental controls, treatment of staff and human rights. In 2000, we signed the United Nation’s Global Compact initiative to work for human rights, establish good working conditions, take responsibility for the environment and combat corruption. We identify our material issues in this area through global networks such as UN Global Compact Nordic Network, our stakeholder dialogues 2002-2003 and partnerships such as Biogas Cities.

Responsibility as a local player

As a local player, our most important stakeholders are our employees, the immediate communities where we operate and local authorities. We have a responsibility to be an honest, transparent and active company. We achieve this by being a developmental, ethical and reliable employer, by contributing knowledge, and taking into account our environmental and social impact in purchasing, production and distribution. As an employer, our responsibility is to provide a safe and healthy work environment. We contribute to the community through the support of research as well as educational and cultural programmes in an effort to foster the next generation of employees and strengthen the reputation of Volvo Cars. Our local environmental impact is something that Volvo Cars takes very seriously. As a result, our production facilities are amongst the cleanest in the world. As a local player, we define our material issues through our internal employee survey (Volvo Attitude Survey), local Stakeholder dialogues and through our Governmental Affairs Department.

Our responsibility

Our vision is to be the most desired and successful premium car brand by creating the safest and most exciting car experience. This vision guides us in our daily work. Our brand is global and so is our influence, even though Volvo Cars is a relatively small company.

• Our roles can be defined on three levels: as a carmaker, as a local and global player.

• Our business objectives and our corporate citizenship commitments feed into each other.

• Our core values are safety, environment and quality – all human-centric values.

From our perspective, we do not just have responsibilities, we act on them. Therefore, our responsibility is to live up to these values – because if we fail, the brand suffers and ultimately so do our sales. In the end, it is our stakeholders that decide how well we shoulder our responsibilities. Our challenge is to continuously live up to their expectations. We actively engage our stakeholders in dialogue and use various channels, in a methodical way, to amass a wealth of information that helps us to be a responsible corporate citizen.

Reference List

Volvo (2007a) Global Reporting Initiative. Available at: https://www.volvocars.com/corporation/Sustainability/GRI/Profile.htm#2_1[Accessed: 20 November, 2007] Volvo (2007b) Cleaner From the Start. Available at: https://www.volvocars.com/corporation/environment/Production.htm[Accessed: 20 November, 2007] Volvo (2007c) Environmental Management Systems, Available at https://www.volvocars.com/corporation/environment/EnvironmentalManagementSystems.htm [Accessed 20 November, 2007] Volvo (2007d) Environmental Policy, Available at https://www.volvocars.com/NR/rdonlyres/B6FBA8E4-BE4E-4F57-90EC-11DEFC6A224C/0/Environmental_Policy_02.pdf [Accessed 20 November, 2007] Volvo (2007e) Our Responsibility, Available at https://www.volvocars.com/NR/rdonlyres/02E1D742-A4C8-445D-B936-7FF170AC49F7/0/respons.pdf [Accessed 20 November, 2007] Volvo (2007f) Environmental Tradition, Available at https://www.volvocars.com/corporation/environment/EnvironmentalTradition.htm [Accessed 29 November, 2007] Volvo (2007g) Cleaner from the Start, Available at https://www.volvocars.com/corporation/environment/Production.htm [Accesses 29 November, 2007] Volvo (2007g) Product life cycle, Available at https://www.volvocars.com/corporation/FactsandFigures/EnvironmentalProductInformationEurope/ [Accesses 12 December, 2007] www.volvo.com (2007) [Online] URL: https://www.volvocars.com/NR/rdonlyres/B6FBA8E4-BE4E-4F57-90EC-11DEFC6A224C/0/Environmental_Policy_02.pdf [Accessed: 10 December, 2007] www.volvo.com (2007) [Online] URL: https://www.volvocars.com/corporation/envirionment/EnvirionmentManagementSystems.htm [Accessed: 10 December, 2007] www.volvo.com (2007) [Online] URL: https://www.volvocars.com/corporation/envirionment/Production.htm [Accessed: 10 December, 2007] Pettie, K. (1995), Environmental Marketing Management: Meeting the Green Challenge, Pitman Publishing, London, chapter 2, 3 pages 36-37. Fuller, D.A. (1999), Sustainable Marketing, SAGE Kotler, P. (2005), Corporate Social Responsibility, Wiley and Sons

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