Lesson Proper for Week 14

Relationship of Business to Environment

According to the International Standards Organization, environment means the “surroundings in which an
organization operates, including air, water, land, natural resources, flora, fauna, humans, and their
interrelation.” In other words, the environment is where organization conduct their business and get their
supplies for business operations. This very same environment where business benefited allot has been
facing different kind of challenges which something that business organization should also deal with.
Some of these environmental issues are air pollution, global warming, clean air, clean water, destruction
of natural resources, and continuously growing of the usage of plastic etc. If nothing is done on the part of
the organization that are in business, which has been affecting the environment; eventually the place
where they conduct business will surely collapse. With this in though, this pushes strategists to formulate
strategies that shows concerns on preserving and conserving natural resources.
Integrating Concerns for Environment in the Organization Strategy
Business concerns for environment has been continuously increasing. They are moving from a non-
environmentally friendly business to becoming a more environmentally friendly business. A lot of firms
have been converting and continuously developing products that are made from recyclable materials and
other things they could do to help the environment. In other words, strategist take the environmental
issues seriously as also one of their main concerns in doing business. According to Mark Starik at George
of Washington University they believe that “Halting and reversing worldwide ecological destruction and
deterioration is a strategic issue that needs immediate and substantive attention by all businesses and
managers.” One example of this is what Coca-Cola did in Netherlands and Norway.
 Coca-Cola Uses 100% Recycled Plastic for their Bottles in Netherlands and Norway
by Erika P., Scient Time posted on 12 September 2020
Coca-Cola in Western Europe has announced on September 7 that it is taking another important step
on its journey in eliminating the use of virgin resin-based plastic that they use in their bottles. Coca-
Cola in both Netherlands and Norway said that they would transition to plastic bottles made from 100%
recycled polyethylene terephthalate (rPET). Before them, the Coca-Cola in Sweden has already
announced the same transition back in December 2019, making them the first market to switch to
100% rPET. Coca-Cola in the Netherlands is scheduled to launch its new bottles by October 2020, in
which all its locally produced small plastic bottles are already 100% rPET, including other brands like
Sprite and Fanta. Large plastic bottles will follow by 2021, which makes the Netherlands as the second
market to make the transition to its locally produced portfolio.
Reducing Carbon Footprint
Coca-cola in the Netherlands hopes that the transition of using rPET will eliminate the use of more
than 10,000 tons of new virgin resin-based plastics, which amounts to a 21% reduction in the carbon
footprint of its plastic bottles per year. Moreover, Coca-Cola Norway will also transition to using rPET
by the first half of 2021 for all their plastic bottles. They hope to remove 4,300 tons of new virgin resin-
based plastics per year that will reduce their carbon footprint by 28% from the plastic bottles they
produce each year before the switch. The primary reason for the switch in Netherlands and Norway is
the effective deposit return schemes and rapidly expanding operations in the two countries, which
guarantees supply to produce rPET.
In a press release, Coca-Cola revealed that the well-designed Deposit Returns Schemes play a
significant role in delivering a circular economy for PET bottles in both countries, which boosts the
collection of PET bottles and increases the quality of PET material collected with less contamination,
which makes it easier to recycle. But there are some packaging where the transition will not be
applied. These include the Netherlands Coca-Cola/Fanta orange 250ml, Sprite 375ml, and
Aquarius/Minute Maid 330ml as these products are produced in Belgium and France. Nevertheless,
Coca-Cola said that it only represents 3% of the total sales in the Netherlands. The switch is also not
applicable in Coca-Cola Norway's Fuze Tea and Powerade brands.
Coca-Cola's Pledge
According to reports, the transition is part of a joint Sustainability Action Plan called This is Forward by
Coca-Cola Company in Western Europe and their primary bottler Coca-Cola European Partners
(CCEP). They have pledged that by 2025, they will collect a can or bottle for each item sold, ensure
that their packaging is 100% recyclable, and to ensure that by 2025, 50% of the content of its PET will
come from recycled materials which shall give birth to their ambition to use zero virgin oil-based PET in
its bottles.
In fact, CCEP has just introduced the CanCollar, which is a paperboard packaging for multipack
instead of the usual plastics being used, and it is 100% recyclable replacing the current hi-0cone
solution, which potentially saves 18 tons of plastic per year. The CanCollar is made without using any
adhesives or glue, which keeps its total carbon footprint and production cost at a minimum. In addition,
the CCEP said that this would prevent the need to use more than 11,000 tons of virgin plastic each
year across Western Europe.
Source: https://www.sciencetimes.com/articles/27274/20200912/coca-cola-uses-100-recycled-plastic-
bottles-netherlands-norway.
However, we cannot deny the fact that even though the negative impact of business in the environment
can be clearly felt and seen yet still there are some business organization who are not into this kind of
movement. Hence, their firm are neglecting ways to help the environment. Which also means turning
away from having a competitive advantage by being a good steward of the natural environment.
According to David and David (2017), “Employees, consumers, governments, and societies are especially
resentful of firms that harm rather than protect the natural environment. Conversely, people today are
especially appreciative of firms that conduct operations in a way that mends, conserves, and preserves
the natural environment”. These facts clearly show that the society now is more conscious than ever of
how firms are doing their business. Business firms now are not only considered as provider of the needs
of wants of the society but rather an environment protector as well. This perspective of how society view
firms the way deal with environment is clearly evident on what happened to Nestle regarding their issue
on palm oil

Profits v Planet: Can Big Business and the Environment Get Along?
by: Sheffi, Y., The Guardian posted on year 2018
“…In 2010, Guinness World Records certified that KitKat was the world’s most global brand, sold in
more countries than any other that year. But on 17 March that year, Greenpeace released a video
parody of a KitKat commercial. The clip opens with a bored office worker feeding papers into a
shredder. Then, the screen turns red with the text ‘Have a break?’ The worker opens a KitKat wrapper,
but instead of fingers of chocolate, he finds the finger of an orangutan – complete with tufts of orange
hair. Coworkers watch in horror as he crunches into the finger and blood dribbles on to his keyboard.
The video urged viewers to ‘give the orangutan a break’ and ‘stop Nestlé buying palm oil from
companies that destroy rainforests’.
Greenpeace used the power of social media to attack fast, far, and wide. In a matter of weeks, 1.5
million people had watched the video. The attack surprised Nestlé. For one thing, the company thought
it had already been addressing the issue. Nestlé had adopted a ‘no deforestation’ policy when directly
sourcing palm oil, committing that its palm oil would ‘not come from areas cleared of natural forest after
November 2005’. Nestlé neither produced palm oil nor owned any farms near orangutan habitats, nor
had it ever ordered the clearing of rainforests to increase production of palm oil – but one of its
suppliers had. Bosses attempted to address the issue by cancelling that supplier’s contracts, a
response that initially failed. Although the effects of the campaign on KitKat sales are not publicly
known, we can infer they were significant – it took just eight weeks for the company to agree to
Greenpeace’s demands…”
Source: https://www.theguardian.com/environment/2018/sep/07/profits-v-planet-can-big-business-
and-the-environment-get-along

Sustainability Reports
According to David and David (2017), sustainability report is a “document discloses to shareholders
information about the firm’s labor practices, product sourcing, energy efficiency, environmental impact,
and business ethics practices”. In relation to the subject matter, this document shows how a certain
business’ operations impact (positively or negatively) the natural environment. Whatever business reflects
on their sustainability reports will have an implication of whether the company is a good business or not.
For this reason, it is important for business organization that their strategist is formulating activities that
sustains the environment.
Philippine Requirement for Sustainability Reports
In the Philippines, Securities and Exchange Commission (“SEC”) requires all the publicly-listed
companies to comply a sustainability reports attached to their annual report (retrieved from
https://www.sec.gov.ph/wp-content/uploads/2019/10/2019MCNo04.pdf on 06 December 2020). With this
as a government memorandum, big companies are now required to disclose what they are doing to help
the environment and what are their impact to the natural environment.
Benefits of Sustainability Report
Again, sustainability reports show how the business organization efforts in helping to sustain the
environment. This report then is not just merely a piece of documents that organizations need to comply;
but rather business who take this seriously are benefitting greatly at some way.
Aside from the factor that businesses who comply this report are clear with their legal obligation, SEC
also says that those companies can also experience the following benefits internally in their organization
and externally at the business environment (retrieved from https://www.sec.gov.ph/wp-
content/uploads/2019/10/2019MCNo04.pdf on 06 December 2020) :
Internal Benefits
1. Effective Management of Sustainability Risks and Opportunities - The process involved in
sustainability reporting allows companies to know and better understand their sustainability risks and
opportunities. This would in turn result to a more effective assessment and management of said risks and
opportunities.
2. Sustainable Vision, Strategy, and Business Plans - Sustainability reporting encourages companies
to assess, and if necessary to update, their visions, strategies and business plans to ensure that
sustainability is embedded in their organizations. It gives companies the opportunity to determine the
necessary changes in their vision, strategies, and performance goals/targets for more sustainable
operations.
3. Improved Management Systems - Sustainability reporting involves tracking and gathering data which
when evaluated can identify the areas that need improvement. In addition, public reporting on
performance motivates companies to improve in succeeding reporting periods, thus, resulting to
improvement in management systems, such as streamlining of processes, reduction of costs and over-all
improvement in efficiency and productivity.
4. Motivated workforce - Creating a sustainability report requires a concerted effort from companies’
employees, exposing them to the companies’ commitment to sustainability. Research have shown that
there is a significant positive relationship between perceived environmental performance and employee
satisfaction. Knowing that the company is environmentally and socially conscious increases morale and
motivates the workforce to work hard for the company.
External Benefits
1. Improved Company Reputation and Brand Value - Having a sustainability report indicates the
companies’ commitment to full transparency and accurate and complete reporting on both positive and
negative news. Moreover, it shows the companies’ efforts towards sustainability. This improves the
company’s image and builds trust and respect for the company. Thereby, improving company reputation
and brand value.
2. Investor attractiveness - Institutional investors are now looking at the ESG practices of companies
and makes this a key element in their investment analysis and decisions. In the CFA Institute Survey
conducted in 2017, 73% of the survey respondents answered that they take into account ESG issues in
their investment analysis and decisions. Sustainability reporting, thus, provides institutional investors easy
access to ESG information of companies. At the same time, it allows companies to discuss their
sustainability performance in a clear and concise manner.
3. Stakeholder Engagement - The process of sustainability reporting provides companies with
opportunities for stronger engagement with their stakeholders, which in turn can result in better
relationships with them. Stakeholders would feel empowered while the companies can gain valuable
insights beneficial to their sustainability journey.
4. Competitive Advantage - Awareness on sustainability reporting is still quite low for most Philippine
companies. As such, having a sustainability report may provide companies with a competitive advantage.
This competitive advantage may be in any of the abovementioned internal and external benefits.
Below is an example of a part of Sustainability Report highlighting the subject business effort in resource
efficiency and carbon neutrality

AyalaLand 2019 Integrated Report

posted on 14 April 2020
 Source: AyalaLand Integrated Report 2019, pg. 72-76, retrieved from
https://ir.ayalaland.com.ph/category/sustainability/sustainability-reports/ on 07 December 2020