Learning Module 5: Corporate Responses to Sustainability Demands PDF

lOMoARcPSD|11364796 Learning Module 5: Corporate responses to sustainability Demands Amazon Example: Many people want companies to be taxed based on their climate emissions. Amazon has founded a 2 billion fund to support carbon neutrality technologies...

lOMoARcPSD|11364796 Learning Module 5: Corporate responses to sustainability Demands Amazon Example: Many people want companies to be taxed based on their climate emissions. Amazon has founded a 2 billion fund to support carbon neutrality technologies, moreover they want to be climate neutral a decade before the Paris COP requires. However, Amazon does not show all its data with the public and depicts relative instead of absolute emissions, thus some fundamental issues are not addressed. The way amazon calculates emissions is problematic: it does not include the production emissions from externally produced products but considers them in their sales. Moreover, it does not include all logistics related emissions in its scope 3 (e.g., emissions that are occur when customers use the products are neglected) Scope 1 emissions are the easiest to reduce because they result directly from the company's activities Scope 2 emissions are also easy to tackle because they emanate from electricity or heat that the company purchases from elsewhere—and companies increasingly can purchase renewable energy Scope 3 emissions, the toughest of all, can be traced to the activities in the supply chain and to consumers who use the company's products. Additionally, Amazons sells their cloud business to fossil fuel industry and thus indirectly supports them to explore, drill, and extract oil and gas. Tutorial Video: Responses on Sustainability Demand There are two different basic response orientations how companies can response to sustainability: Proactive Reactive More control, strategic focus Less control external able to integrate priorities expectations are only into their strategy formulated reactively Possibility of (over) Possibility of cost savings/but expenditure large reputation damaged Remaining uncertainty know what min. can better target costs requirements are expected better target efforts Indication of key focus areas 23 / www.temagroningen.nl / [email protected] Gedownload door Bart S ([email protected])  lOMoARcPSD|11364796 Only a proactive approach is compatible with higher level of CRS. Generally, it is better to have a proactive response orientation towards sustainability, however, to lower the possible economic disadvantages it is important to firms to accurately predict the evolution of sustainability demands that it may face it the future so not to overexpand resources and to focus on the right sustainability priorities. In order to talk to stakeholder, one first has to identify all relevant stakeholders: 24 / www.temagroningen.nl / [email protected] Gedownload door Bart S ([email protected])  lOMoARcPSD|11364796 Each stakeholder has to be classified: 1. Power and influence 2. Interest Also engaging along the value chain has become increasingly important. Companies have two different approaches in doing so: 1. Standards based approach: Companies require certain certifications / adherence to minimum standards from their suppliers. This however is only possible if the company has sufficient bargaining power (e.g., NIKE, McDonalds) Industry collaborations are useful here, as there is an inefficiency risk if several different certifications exist in the market 2. Developmental approach: Collaboratively engage in shared problem solving to improve performance. Example: Coca Cola, rather than threatening to kick out business partners Coca Cola jointly developed new procedures and created incentives to implement them When to turn to the supply chain? Expecting sustainability changes of supplier is only advisable if Enough sustainability credentials for the demand to be seen as legitimate It only makes sense when it is expected to be cheaper than making changes inhouse It is needed to meet external demand or anticipate likely changes in demand from stakeholders 25 / www.temagroningen.nl / [email protected] Gedownload door Bart S ([email protected])  lOMoARcPSD|11364796 It can help reduce the risk of falling out of sync with toughening environmental regulations 26 / www.temagroningen.nl / [email protected] Gedownload door Bart S ([email protected])