1. Identify and analyse the stakeholders of your selected organization and their attitudes towards one of the plans / developments / proposition raised in the case study. How does the organization balance its responsibilities? Volvo is regarded as being a pioneer with regards to developing technology that reduces impact on the environment. It is important that they take this stance primarily because this industry in particular is regarded as being responsible for the offset of large amounts of carbon dioxide.
However, in the past, changes in stakeholder and overall organisational direction have meant that many of their environmental initiatives have worn away as a result. Volvo and its stakeholders believe that the protection of the environment is one of their core strategic goals. Volvo had a chance to exploit this during the time when Gothenburg’s government became wary of the effects of pollution on the city, even though there are some residual arguments for and against the government being a stakeholder in an organisation.
Regulation problems on compressed natural gas vehicles made it difficult for Volvo’s Bi fuel vehicles to prosper. The German government lowered taxes on CNG to help promote its growth to no avail, as other European countries did not do so. Therefore demand was affected as Volvo tried to promote their environmental responsibility. In 1993, Volvo, along with its stakeholders evolved their environmental strategy which allowed them to create a team dedicated to their environmental responsibilities. This top management decision had meant that the notion of ‘environmental responsibility’ now echoed around the whole organisation.
In the late 1990’s, a change came about in organisational attitudes, as a new CEO was appointed who was more rooted in the short term profitably of Volvo rather than its long-term responsibilities. He proceeded to turn the special environmental division to a profit centre, and as the profitably of Bi fuel cars was not very high he decided to discontinue them completely. Most of the ideas and actual products for the environment were based on existing technology where costs were high and the products were often complex in design. Introduction of new technology would be the way forward but it would need all stakeholders to work with each other to create a network of sorts for it to be successful in the market.
Volvo chief executive Leif Johansson has stated; “The Greenhouse Effect is a reality and the automotive industry has a specific responsibility for coping with emissions of carbon dioxide. We also expect that it will eventually be profitable on a purely commercial basis.” Columbia Corporate Social Responsibility Network Newsletter October 23rd, 2005. This shows the attitudes of Volvo regarding the Environmental direction they wish to pursue.
It is key that the company can capitalise on its core value of the environment, at the same time profiling their brand and profitably on the notion of going green. But stakeholders are often faced with the questions; Is going green is going to hinder or increase its profits? And is the process going to a tedious and complex way forward? This is what stakeholders have been trying to understand in relation to the direction they want to adopt.
The shortage of oil in conjunction with growing issues regarding Co2 emissions has caused issues to arise with regards to strategy. If Volvo wanted to target a more affluent market they would need to produce bigger and more powerful premium cars, which would in turn, undermine some of their environmental objectives. To conclude, the key to success is to understand how having environmentally sound vehicles and balancing this with the profitability which Volvo strives to make within a fiercely competitive motor industry.
Environmental footprint of Volvo With regards to Volvo and the car industry in general there are two stages at which the business is making a significant environmental impact. Firstly during the raw material extraction stage where materials are obtained to create the car, then is the stage at which the product is sold where you have issues related to pollution in the respect of use of the product.
Extraction of raw material such as Steel, Iron, Rubber, Plastic and Aluminium causes copious amounts of air pollution and waste. Mining for metal has caused considerable damage in regards to deforestation in Brazil, in addition to this, there are the pollution elements where the extraction of raw materials creates dangerous pollutants such as Co2, Sulphur dioxide. Further extraction of materials such as Aluminium need large amounts of energy while at the same time causing pollution and soil degradation which can also harm the visual nature of an area. Other precious metals such as Platinum are required to be extracted in large amounts; millions of tonnes of ore must be refined each year for the cars catalytic converters. Further asbestos must be used in brake pads along with CFCs for seat foam, which are all polluting materials and hazardous to the environment and ozone layer.
The materials must then be transported to where the car will be produced, which again causes further environmental damage. Once the cars life span is at an end, then comes the stage of disposal which again creates considerable waste. Other contributing factors to this whole process are that of the constant growth of the human population therefore increases car ownership and thus having more of an environmental impact.
Other factors such as a highly competitive automobile market means that car companies strive to gain economies of scale which requires obtaining large amounts of materials further adding to the environmental damage. Further factors are the costs that are associated with obtaining virgin and recycled materials, as obtaining recycled material can be more expensive due to the processes that are needed in order to recycle them and bring them back to use again.
Volvo has created an environmental load system, which aims to choose the least harmful material for each component of the car. Materials and processes are given scores, which help in identifying their environmental load. For example you would be able to calculate the environmental load of having a steel or aluminium bonnet. Extraction of raw materials is taken into consideration along with transport, production, disposal and recycling of vehicle.