Friday, 25 February 2011

Toyota Recall: 'can we fix it?'

For a while, Toyota had it all. It was the automotive equivalent of the prom queen: the Japanese automaker was loved by investors, crooned over by the media and – most importantly – trusted by consumers.

And then it all went wrong. Allegations about dodgy accelerator pedals saw it compelled to announce a massive recall in late 2009 and early 2010. Most of the fall out occurred in the US. But recalls in China, Europe and Japan had the rest of the world raising eyebrows too.

A year on and it seems Toyota is still not out of the woods. Yesterday, the doyen of ‘kaizen’, or ‘continuous improvement’, announced yet another recall. A further 2.2 million Toyota and Lexus (a Toyota subsidiary) models are to be withdrawn from the roads in the US. 

The obvious question is ‘where did it all go wrong?' Excessive growth, concludes Stephen Gardner in Ethical Corporation’s special Briefing on Classic Corporate (Ir)responsibility Case Studies. Toyota’s international growth has been nothing short of spectacular in recent years (Revenue shot up 41.5% between 2005 and 2008). But at what cost? Answer: quality oversight. In short, the rush for market share won out against “Toyota’s traditional, methodical” approach. 

Perhaps the more pertinent question, however, is ‘where to go from here?’ The European Academy of Business in Society’s director-general Simon Pickard provides some helpful hints: acknowledge your faults, implement ‘clear and transparent’ systems of redress, accept customer criticism, cooperate with regulators and increase quality assurance.

Toyota was guilty of being slow in coming forward. While the company was going global, the company’s management was busy staying local. So when crisis struck, Toyota’s hierarchical decision-making structure reduced its agility to respond. As for its transparency, a hearing by the US lower house judged the company’s initial responses as “ambiguous”.

To Toyota’s credit, it’s since gone all out to turn the situation around. The tone started from the top. Company president Akio Toyoda went on record with a comprehensive mea culpa. “We pursued growth over the speed at which we were able to develop our people and our organisation.” That’s some confession. To follow it up, he ordered a “top-to-bottom review” of its global quality assurance processes. New safety initiatives are also being rolled out.

Toyota also has revved up its communications - another all-important step in crisis situations. Advertising campaigns, media interviews, free phone customer service numbers and dedicated websites – all have been used to reassure customers and send the message out that the company's cars are (or soon will be) safe.

Reputations famously take a lifetime to build and only a few minutes to lose. Toyota remains in a PR mess. How it acts now and in the coming months will be critical to winning back consumer confidence. Its response measures so far look sound. In the long run, they should - to borrow from author H.G. Wells – prevent the crisis of today becoming the joke of tomorrow.

Sunday, 20 February 2011

Biodiversity: it's a dependency thing

Five years ago, UK tobacco firm British American Tobacco (BAT) released a public statement on biodiversity. It is far from the first company to have done so. The issue of biodiversity  (in short, ‘the totality of genes, species, and ecosystems of a region’) has become a hot concern for businesses in recent years. Last October’s Convention on Biological Diversity meeting saw almost as many suits as scientists in attendance.

What stands BAT’s commitment apart is its explicit recognition that it not only has an impact on biodiversity, but a dependency too. That turns biodiversity from a straightforward risk issue (hedging against reputation loss or avoiding litigation) into one of future strategic importance (most clearly, protecting production and supply).

The notion of ‘biodiversity dependency’ is only just appearing on corporate radar screens, as Ethical Corporation’s recent Briefing on the subject spells out. That’s too bad. Healthy ecosystems are responsible for public goods such as clean water, fresh air, sufficient food and a stable climate – services on which all businesses rely. Seen as such, biodiversity becomes less about saving the panda and more about protecting the bottom line.

It is strange therefore that more companies are not taking BAT’s lead in trying to manage the issue. A recent study by specialist investor group EIRIS finds that only 6% of companies with high impacts on biodiversity has sufficiently robust policies in place.

One reason could be that managing impacts on biodiversity is no easy task. BAT, for example, pledged to embed biodiversity management into all its operations around the world. “It was a nice phrase, but no-one really knew what it meant”, admits Paul Laird, corporate partnership manager at the Earthwatch Institute, an international environmental organisation and a member of the BAT Biodiversity Partnership.

After much experimentation and several wrong turns, the tobacco company came up with its Biodiversity Risk and Opportunity Assessment tool (known as BROA). It'is essentially a three-stage process. The first step comprises an initial desk-top exercise designed to identify potential direct and indirect impacts on local biodiversity. The second involves a field-based assessment of those possible impacts. And the third requires local management to address these impacts.

One of the unique requirements of the approach is for BAT’s operating companies to work with a local partner. This is seen as giving the process credibility, as well as providing an external, expert perspective.

The management approach has its limits, however. The site-specific nature of this (and similar biodiversity assessment methodologies) makes aggregating data difficult. Identifying generic ecological improvements of landscapes or rating the company’s overall biodiversity performance is not yet possible either. Yet it's a start, and an example of what other companies could - adn should - be doing. 

n.b. Ethical Corporation’s recent Briefing on biodiversity provides a detailed overview of current management practices, as well as efforts to value ecosystem services

Thursday, 10 February 2011

McLibel: responsibility, the hard way

Every company would like you to believe that responsible business is part of their “corporate DNA”. It’s not. Companies are no more “hardwired” to be responsible (or irresponsible) than us mere mortals.

Responsible corporate behaviour evolves from governing principles underpinned by nitty-gritty policies and everyday processes. It’s not a feel-nice philosophy. It’s a case of non-nonsense management mechanics.

So how do integrated responsibility management systems come into being? Companies have two basic options: the easy way and the hard way. 
The easy way involves the company taking a measured, calculated approach that chimes with its business operations and objectives. Principles are voluntarily decided; issues voluntarily assessed; policies voluntarily established; and then targets voluntarily set. Hey presto.

The hard way scraps all sense of voluntarism and demands that the company get up to speed across all its operations immediately. What’s more, as the company is doing so, every inch of its activities are publicly scrutinised with the attention of a forensic scientist.

That second option, essentially, marks the route taken by McDonald’s. When the global food chain threatened to sue two unknown UK campaigners for libel in 1990, it effectively waved goodbye to an easy ride.

Judy Kuszewski provides a detailed appraisal of what became known as the “McLibel” affair in Ethical Corporation’s recent Classic Case Studies report. The article charts the story of how two individuals and one protest leaflet gave rise to the longest court case in British legal history.

As a case study, the McLibel experience holds a dual message. First, avoid the law courts wherever possible. Even if the company wins (as McDonald's did, albeit in a pyrrhic sense), the negative publicity can be disastrous. (It’s a lesson that the world’s largest pharmaceuticals also learned in another classic case study covered in the report).

Second, it shows that the hard way has at least one upside. As Kuszewski's article indicates, several commentators maintain that McDonald’s has emerged as a better managed, more responsible company as a result. (Judge for yourself.)

Would it have preferred to take the easy way? Yes. Does it regret playing legal hardball? Almost certainly. But at least, the company can point today to a comprehensive management framework – and one that’s born from sweat and tears rather than genetics.

Thursday, 3 February 2011

CSR & the Elderly: Grayson on Greydom

David Grayson has a knack for spotting what others miss. Back when Thatcher was busy privatising, he was bothering about the jobless in England’s industrial north. When the generation were forever job-hoping, he was worrying about opportunities for those with disabilities. And when the corporate juggernaut was trumpeting global “CSR”, he was pondering the role of small business in the whole shebang.

In a timely essay in the latest issue of Ethical Corporation, Grayson turns his eye to another issue our youth-obsessed culture regularly overlooks: older people. Over one in ten (11%) of the world’s population are over 60. Better nutrition and better medical care will see that percentage double in the next four decades.

So what? So a lot actually. Businesses can’t afford to ignore the elderly, either on moral or commercial grounds. Take pensions. Who should pay for them and how? It’s just one of a range of issues relating to “intergenerational equity”. If you’ve not heard the term, get used to it. You’ll be hearing a good deal more of it in the future.

Here’s another phrase: ‘age friendly’. From a human resources perspective, management needs to think long and hard about how it treats its elderly employees. With retirement ages slipping, workforces are set to become older. As a minimum, that will require new, more flexible working patterns. It may also require some physical adjustments to workplace conditions, much as companies now accommodate the needs of the disabled. A multi-generational workforce also promises its own set of challenges; conflicting expectations, difficulties in communication, differential use of technology, diverse approaches to problem solving and innovation. Think Christmas dinner with the family - only on the factory floor.

As Grayson warns, expect ‘age friendly’ to soon enter the marketplace lexicon too. Advertisers, especially, need to wake up. Old people aren’t just for anti-smoking ads. Not only is airbrushing out the elderly discriminatory. It’s also short sighted. Remember the ‘pink pound’? Well the 'grey pound' will make it look like pocket money. The supermarket that structures his aisles for the less mobile; the mobile phone company that builds a device for the hard of hearing; the bank that introduces a tailored equity release scheme to finance long-term elderly care - all are sitting on mines of silver.

Moral responsibility towards the elderly presents business with a number of important management imperatives, both in the shopfront and in the back office. So too with commercial logic. Changing market demographics oblige companies to sit up and take note of the world’s senior citizens. “Anyone who stops learning is old, whether at twenty or eighty”, automobile pioneer Henry Ford liked to say. Companies, take heed and innovate. The elderly are here to stay.