Importance of the environmental issues for multinational companies

Contents

1.0 Introduction 3

2.0 Increasing awareness of the environmental issues 3

2.1 Requirements from CSR 3

2.2 Requirements from customers 4

2.3 Requirements from legislation 4

3.0 Strategies and practices of multinational corporate 5

3.1 Strategic target of sustainable development 5

3.2 Environmental friendly products 6

3.2.1 Ingredients 6

3.2.2 Product package 7

3.3 Promotion strategy 8

3.4 Staff issue 8

4.0 Outcomes 9

5.0 Recommendations 10

5.1 Setup of Office of Environmental Information (OEI) 10

5.2 Establish environmental code of practice……………………………………11

6.0 Reference…………………………………………………………………………12

Figure

Figure 1.0 Net profit of L’Oreal ………………………………………………………6

1.0 Introduction

With the development of the economy globalization and international business, the environmental issues attract more and more attention from all over the world, which even become the one of the major focuses of the international economy as well as international politics. To align the environmental issue with the international business becomes the main trend for firms which run the international business. In this essay, we’ll develop a discussion on the importance of the environmental issues in the global business for multinational companies.

2.0 Increasing awareness of the environmental issues

2.1 Requirements from CSR

According to Trevino and Nelson (2007), the corporate social responsibility (CSR) is defined as the essential aspect of the company’s mission to fulfill the responsibility via the actions of company to encourage the positive outcomes on the aspects of environment, customers, employees and other related stakeholders. And nowadays, whether a company conducts well to fulfill its social responsibility also works as the criteria for its stakeholders to evaluate its business performance. Due to this situation, it is important for business to be motivated to really fulfill its corporate social responsibility and align it with it business practices well so as to build good reputation and win a high social recognition.

In another word, the environment protection issues as one part of the CSR of the company also should be paid great attention.

2.2 Requirements from customers

With the economy development, more and more people notice the importance of environment protection, most of whom begin to purchase products which are environmental friendly. According to the survey in China that more than 36.7% consumers in the middle to big cities prefer or intend to buy the environmental friendly products, which has an increasing number (Ambler & Witzel 2008). Even the customers from developing countries have such kind of environmental awareness, let alone people in these developed countries such as the USA and European countries.

This trend of product purchase on the environmental friendly products provide the pressures for companies especially those run the international business to produce their products as the environment friendly ones to meet the main stream.

2.3 Requirements from legislation

State government also tries every means to practice environment protection activities which also give these firms great pressure in environment protection. The European Environment Agency (EEA) for example, claimed the data of the airline carbon emission is increased even more than 80% from 1990 to 2004 in the countries of European Union. To solve this situation, the EEA has executed the scheme on carbon –trading to restrict the carbon emission of airline business via the high taxation. Other countries also issue many laws or scheme to restrict these business activities of firms both from domestic and international to protect the environment. (Witkowska & Wysokinska 2005) 

For these firms who want gain more market share and well as profit more, it is necessary to watch out these laws concerning with the environmental issues, or else their business may come into a dilemma situation or even fail once their business activities violate the legislation.

3.0 Strategies and practices of multinational corporate

3.1 Strategic target of sustainable development

To better meet the trend of environment friendly and protection in order to build a good reputation and attract more customer, most of the business runners firstly choose to setup the sustainable development mission to guide their business functioning in the right direction (Michae, Hitt &Robert 1995).

As the environmental issues arouse such great attention from the whole society, it is also necessary as well as important for firms to take it into great consideration.

L’Oreal for example consider the sustainable development as the main trigger for its business properly development. It focuses the environment protection issues so much that in the year 2009, it has invested nearly €665million in the environmental friendly product research and innovation. And under the guild of such sustainable development mission, L’Oreal has not only built a good reputation but also enjoy a high profitability as figure 1.0 shows. (L’Oreal 2010)

Figure 1.0 Net profit of L’Oreal

Importance of the environmental issues

Source: Adapted from L’Oréal 2009: Annual Report: General brochure,

3.2 Environmental friendly products

3.2.1 Ingredients

To follow the issue of environment protection, lots of the companies, especially these multinational ones tries every means to produce its products with low carbon and natural ingredients instead of the pure chemical ones. Such kind of situation is obvious in these light industries aspects such as the cloth making and cosmetic making industry (Trevino& Nelson 2007).

The famous Chinese cosmetic brand herborist is such kind of industry which takes care of the environment issue seriously and involves it in its product manufacturing aspects. Most of its products are made from the Chinese traditional herbs which are always considered as the natural and environment friendly products that is why it is so popular among the Chinese market (Li & Fung 2009).

Meanwhile, the Digititan battery maker of China is also the supporter of environment protection. Not the same as the traditional battery maker, it invests a lot in its products design which result in the advert of the so called encycle, which is a tool adhere to the bottom of the battery to enhance the service time of the battery, to reduce the pollution brought by the battery littering. No doubt, this product also enjoys a good popularity in the market for a long time. (Ambler & Witzel 2008)

3.2.2 Product package

In order to strict to the philosophy of environment protection reducing the pollution, many firms also make efforts in product packaging aspects (Palmer 2009). Let’s take the packaging of the mobile phone industry for instance. In the previous time, most of these mobile phone products often adopt big and complicated packages. While in the present time, with the influence and guidance of environment protection philosophy, many of the mobile phone makers especially those famous global brands such as Apple, Nokia, HTC and so on have adopt a environment friendly strategy in product packing. They adopt a small package with innovative design to show the brands’ specialty and care for environment which also wins many supports from the customers as well. (Palmer 2009; Ambler & Witzel 2008)

3.3 Promotion strategy

Many fast food brands, such as KFC and Mcdonald’s, practise the environment protection activities well. In the past, those discount coupon of KFC and Mcdonald’s were often distribute every corner of the streets which not only pollute the environment but also waste the paper. To reduce the waste and pollution, KFC and Mcdonald’s are so smart that they offer the web links of the discount coupons for their customers. That is to say, if the customers need the discount coupon, they can download it from the internet and print it out, which not only is environment friendly but also help the companies to save the cost in the leaflet. (China today 2004)

3.4 Staff issue

To best facilitate the environment protection issue, most of firms especially these international companies show great concerns with the staff recruitment and development issues with the belief that the proper talents can assist their organizations to go further and win more support and good reputation in the society (Palmer 2009). In the L’Oreal group, in the staff recruitment and selection process, these candidates are offered with the company mission and vision in sustainable development and environment protection issue which make them have the clear understanding of the business in the environment protection aspect. And in the staff development aspects, those employees are also offered properly designed training content to make them further understand the real needs of the company and the market in the environmental issues aspect which often works as the proper guidance for them to better facilitate the future development of the company and strengthen the good reputation of L’Oreal group as the environment friendly organization. (Palmer 2009 & L’Oreal 2010)

4.0 Outcomes

Based on the above analysis and discussion, we can find that the high awareness of more and more companies in the environmental issues have contributes a lot to their development and image building. It is a good means to strengthen the relationship between the organization and the local community with the concern of the environment (Griffin & Pustay 2010). Meanwhile, it is also important for these companies to attract more talents under the assistant of clear working environment and sustainable development philosophy. Moreover, it also reduce the chance of break the laws on the environment protection aspect (Griffin & Pustay 2010).

And for the operation of the company, there are also many benefits. Firstly, the guidance of environment protection help organizations to reduce the costs spent on environment clean and maintenance. Secondly, the care of the environment also assist organization reduce the risks arousing from the environment. And the last but foremost, it can help organization save cost in waste treatment. (Michael, Hitt & Robert 1995)

Furthermore, the high awareness of the environmental issues have also contributes to the better marketing outcomes. For example, it can enhance the competitiveness of products in the environment protection aspect and even strength its competitiveness in the international market. (Palmer 2009)

5.0 Recommendations

5.1 Setup of Office of Environmental Information (OEI)

The first recommendation provided to the multinational corporations in coping with the environmental issues would be set up an Office of Environmental Information (OEI) which would be in charge of three major roles.

The first role would be to develop organizational wide policies, procedures and techniques for quality-related activities relating to the collection and use of environmental information, this role ensure that the organizations would have its own access to the information that involves the any environmental issues which could be further researched and studied to form the future plans in environmental protection; the second role of the Office of Environmental Information (OEI) would be to monitor the implementation of the environment relative policies in term of effectiveness and to ensure that it is implemented according to the time table set by the organizations; the third role of the Office of Environmental Information (OEI) is that the office would help make sure that there will be an independent office that employees could refer to when they are facing with dilemma regarding the environmental issues. (Palmer 2009; Ambler & Witzel 2008)

5.2 Establish environmental code of practice

Environmental code of practice could be made by the above mentioned Office of Environmental Information (OEI) by referring to the successful similar codes within the laws and government regulations; and also the formation of the code could be a joint effort by the company and the invited authorities such as some non-governmental organizations and associations.

There are two major functions of this code of practice in the environment issues: firstly, the environmental code of practice could act as a training resource for the new employees who have not get involved with the major environmental issues, and this code of practice could prepare them to handle the issues with correct procedures and attitude rather than following the seniors’ old way which may not be right according to the code of practice. Secondly, internal conflicts appear, employees would have reference if they want to do any things to help the company to advance in the road to a better company in term of the environment protection. (Palmer 2009; Ambler & Witzel 2008)

6.0 Reference

Ambler & Witzel 2008, Doing business in China, 2nd edn, RoutledgeCourzon, New York,

China today 2004, KFC and McDonald’s: A model of blended culture, China daily, viewed 10 August 2011,
<http://www.chinadaily.com.cn/english/doc/2004-06/01/content_335488.htm>

Griffin, R.W. & Pustay, M.W. 2010, International business, 6th edn, Pearson, New Jersey,

Michael, A., Hitt, R. & Robert E.H. 1995, Strategic management: Competitiveness and globalization, MIT Sloan Management review,

Li & Fung 2009, Latest developments of China’s cosmetics market, Li & Fung Research Centre, viewed 10 August 2011,
<http://www.idsgroup.com/profile/pdf/industry_series/Issue14_Cosmetics.pdf>

L’Oreal 2010, Sustainable development report 2010, L’Oreal Group, viewed August 9 2011,
<http://www.sustainabledevelopment.loreal.com/>

Palmer, A. 2009, Introduction to marketing theory and practice, 2nd edn, Oxford University Press, New York,

Trevino, L.K. & Nelson, K.A. 2007, Managing business ethics: Straight talk about how to do it right, John Wiley & Sons, Inc. Hoboken,

Witkowska, J. & Wysokinska, Z. 2005, International business and environmental issues-some empirical evidence from transition economies, Polish Journal of Environmental Studies, vol.14, no, 3, p.269-279,

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