Sustainability Management Report: An analysis of the case of PowerGen plc Ltd in the United Kingdom.
Studies note an increased effort of management practices over the years in companies or organizations of different sectors; however, there has been much less focus on sustainability management within these organizations in different industries/sectors until recently. Now, however, perhaps in large part to consumer pressure, the concept of sustainability recently is among the most spoken-about issues in organizational management circles. Shriberg (2000) attests how the concept is well appreciated even more in higher education management in his account of the Michigan University’s Housing Division. The striving to enhance or promote organizational reputation for most companies is a great priority, thus there are more sensitive social responsibility issues which are an integral part of the sustainable management concept. The concept has been often criticized by some, probably because of the type of business they do or the nature of the business; for example, profit making or non profit making as some scholars suggest: that ‘sustainability concept may be very good idea but organisations operate with business mentality in order to grow`. This view may vary greatly to a company operating as a social enterprise whose main motive is not just making profit.
This piece of writing is to analyze the sustainable management of PowerGen Plc Ltd using the Corporate Social Responsibility approach. The Triple Bottom Line Framework is recommended by many, but it is believed it has some drawbacks which the author also acknowledges are true, and so would rather prefer CSR approach from the foundation of the analysis of this paper. Nonetheless, arguments of the Triple Bottom Line approach will be used to support the analysis as any outline criticisms of the approach does not mean the whole effort is not useful. Some critics of the Triple Bottom Line Framework who promote CSR approach have this to say: “that the CSR Approach deals with implementations of better strategies that an organization can employ to become more sustainable”(Topalovic, 2008 p 16). Also, it is argued that companies arrive at more balanced result of the economic, environmental and social domains and still meeting stakeholder and shareholder expectations (Corporate Social Responsibility, 2005).Therefore, this analysis will use mainly the CSR approach; however, arguments will be substantiated by the Sweet Spot sustainability approach and the stakeholder theory, for better analysis of the PowerGen Plc Ltd.
The article is structured as follows:
- Overview of PowerGen Plc Ltd
- Theoretical Framework
- Overview of PowerGen plc Ltd
PowerGen plc Ltd is an infant company of Renewable Energy Generation Limited (REG) which specializes in development, construction and operation of renewable energy well across the entire United Kingdom. Last year, in June 2010, the Company acquired the St. Breock wind farm from E.ON Climate and Renewable UK Operations Limited and it is the biggest UK based energy supplier serving about 9million customers across the United Kingdom (20 percent of customers based in the United Kingdom) whilst it generates 14percent of all the UK’s customer power demands. Now a subsidiary of a company called E.ON, which is a German, based Energy Company, PowerGen now plans to reinvest another huge sum of money (over £1 billion) into renewable energy sources or plants in the next ten years as studies argue (Connor 2004). That initiative targets to produce electricity by ‘green’ sources by the year 2014. PowerGen, like others who are mindful of their reputation, recognised for sometime the need to create sustainable development policies by sustainable management in order to win the attention of the customers, the media, the government, nongovernmental organisations, society and all other stakeholders of interest. Over the previous years, there has been a great shift of some human paradigms (i.e. from the laws of nature to social) which urges some human consciousness of nature (Porter and Brown 1996)
1.2Definition of Sustainable Development and Sustainability Management.
Sustainable development as defined by WCEB (1987) it is development “that is meant or intended to meet the essentials (needs) of the present without tampering with the ability of future generations to meet their own needs”. Brundtland Report (1987) also sees it in a similar manner and accounts that ….”It is about meeting the needs of the present without compromising the ability of future generations to meet their own needs”. So sustainable management involves the arrangements (plans) made, control, budgeting, financing and forecasting how present actions will make the future generation no worse off. It is clear and arguable that all companies or organisations would not want to be a part of sustainability management mindset; however, Willard (2008) argues that the two go together: i.e. every organisation becoming socially responsible and making of profit. It can be clearly seen that such a view explains why the Triple Bottom line approach to analyse the sustainability of a touches several aspects of the company and so is considered a holistic approach (Elkington,2004) Several scholars have raised questions because of the their organisational set goals and objectives. For instance, some profit oriented organisation or companies will get carried away only by how much profit they make disregarding the ethical aspects of what they do. Elkington and Dudok van Heel (2008) argue that sustainable gospel is nice but profit making is what will enable companies continually open their doors in their life time. Moreover, ethical issues which are some of the aspects which CSR emphasize subjective among cultures that the companies operate; nonetheless, there is a balance across the nations expected CSR guidelines companies irrespective of their locations must adhere to in order to be approved as being socially responsibility.
2 Theoretical Frameworks
2.1Corporate Social Responsibility
Corporate Social Responsibility (CSR) according to World Business Council for Sustainable Development(1999) report, is the ethical behaviour of an organisation towards society; management acting responsibly in its relationship with other stakeholders who interest in the business or company (See Fig 2 on power versus Interest below) and the commitment by the company to respond ethically and contribute to the economic development of the life and workforce and their families as well as the local community. However, to draw absolute conclusions or measurement to these social or ethical aspects may be cumbersome. Ethics and morals have been used interchangeably in most public settings, but according to Fisher and lovell (2009) ethics “is word that stems from a greek noun ethos, meaning belief”; in philosophy and the word concerns the doing of good and tends to be developmental in meaning, while they also defined morality with meaning from a related word from Latin `mores` meaning customs; in philosophy, the word concerns the preventing of wrong doing and tends to be judgemental. The table below may act as a guide to those social issues that can be used to analyse PowerGen Plc Ltd and so will help point the direction of the impact socially ( i.e. Table 1)
Table 1: Social Issues for Businesses.
|Respect for Employees||Health and Safety; child-labour; exploitative practices, safe working conditions; involvement in decision making; collective bargaining; privacy; work life balance|
|Diversity, Fair Hiring Practices||Non-discrimination; employee diversity; cultural diversity; training and development; fair wages; board diversity.|
|Responsible Governance||Operation of business in legal and ethical way(corruption ;bribery)|
|Respect for Stakeholders||Fair trade; Impact on local culture; Human rights|
|Fair dealing with Customers||Transparency; customer relations; compensations and claims.|
Source: Adapted from Blackburn, W.2007, the Sustainable Handbook, p 24 & 25
PowerGen views this sustainability view that is in lined with the corporate social responsibility approach.
Corporate Social Responsibility (CSR) as the real way to attain sustainable development through sustainable management proven by a number of UK companies like Transco and BP among others who were nominated as the most responsible companies in recent times. (Sunday Times, 2004).
2.2 PowerGen`s Corporate Social Responsibility on Scale of Balance.
There are two schools of thought regarding what responsibilities an organisation or company like PowerGen Plc Ltd has. There is a narrow view school of thought that has been promoted by Friedman (1970) and it is believed according to this school of thought that an enterprise or companies only operates to make profit. On the other hand, there is a much broader school of thought that promotes the ideas of people like Freeman, Goodpaster, De George (2010) etc. who hold that an enterprise or company should be responsible for its actions: i.e. promote sustainability practice that is believed to be the fulfilment of an organisational goal without any hurting the future generation or the planet. PowerGen Plc Ltd has followed this latter school of thought and it is argued that, when stakeholders’ opinions are not well taken into account, profits may likely diminish or suffer. According to Freeman, the narrow school of thought is likely to cause a great many problems and can cause pollution and environmental damage. Drucker (1981) holds that leaders or managers of organizations or companies are liable to account to society and all other potential stakeholders of the organisation. For instance, PowerGen Plc Ltd has several stakeholders (as shown by figure 2 above) but all these stakeholders do not hold the same level of power and interest in PowerGen..
Stakeholders “are those people or parties such as group/ institutions that have an interest in, or affected by, an organisation” (Freeman, et al 2007).
Figure 1: Stakeholders of PowerGen Plc Ltd.
Source: Adapted from Clarkson, M.B.E. (1991). Defining, evaluating, and managing corporate social performance: The stakeholder management model. Research in Corporate Social Performance and Policy, 12, JAI Press Inc., pp. 331-58
Figure 2: Stakeholder Power vs. Interest Matrix of PwerGen Plc Ltd.
|Low||A. Minimal Efforts (e.g., Contractors of PowerGen Plc Ltd)||B. Keep Informed (e.g., investors of PowerGen Plc Ltd)|
|High||C. Keep Satisfied (e.g., customers of PowerGen Plc Ltd)||D. Key Players (e.g., owners, directors, of PowerGen Plc Ltd)|
Source: Adapted from A. Mendelow, Proceedings of 2nd International Conference on Information Systems, Cambridge, MA, 1981 by Gerry Johnson and Kevan Scholes, Exploring Corporate Strategy: Text and Cases, Third Edition. London: Prentice Hall International, 1993, pages 176-177
2.4The Stakeholder Theory
A stakeholder is any people, party, group/institution which affects an organisation’s activities or is affected by the activities of the organisation. There are internal and external stakeholders (Freeman, et al 2007). Donaldson and Preston (1995) who argued after examining the stakeholder theory, that it can be sustained on the basis of three aspects including “The descriptive accuracy, instrumental power and the narrative validity”. Considering each one of these three aspects highlighted above, it can be stated that the said theory (stakeholder theory) is descriptive, predictive and accurately reflects how an organisation like PowerGen operates.
The internal stakeholders of PowerGen Plc Ltd include its employees, managers, and owners, while the external stakeholders include the suppliers, society, government, creditors, shareholders, investors and customers: in fact, just about everyone. Considering its investors, for instance: they influence or impact the activities of PowerGen Plc Ltd by the resources they invest in PowerGen Plc Ltd. On the other hand, PowerGen Plc Ltd in return affects the affairs of the investors by the dividends paid to them, share price and their ‘value’ right from day one of their investment. E.ON, as mother company or owner, can make decisions that can alter PowerGen Plc Ltd`s corporate strategy (See Figure 3 above showing power vs. Interest). PowerGen Plc Ltd also operates contractual work with other companies and specialists to meet quality standards, and such individuals are interested in its affairs; but according to the power vs. Interest matrix is minimal as shown in A above (See power vs. interest Matrix). In B above you can have regulators, potential investors who need to be actively informed of how the activities of the company function, whether it respects the law, pays its taxes, and adheres to certain stipulated guidelines of its operations. Most companies ensure that most information is reported in confidential manner (i.e. giving right information to the right bodies). Potential investors will want to know whether PowerGen respects the laws of the land, pays taxes, is making a profit, is solvent, and whether most of the accounting reports that reveal their financial viability are expected to published and audited on schedule. This then builds their confidence to believe PowerGen is a good company to invest in. It is often said nowadays that the customer is the king and every business must have a primary assignment to identify its poetential customers, understand their needs and strive to ensure that they are fully satisfied, especially because of poor service delivery. If customers are not satisfied, explanations and/or apologies must be sent with reasons as to why they could not meet their promises. By doing this, customers can be retained, as can a good reputation; it is more costly to bring in a new customer than retain an old one, of course. PowerGen Plc Ltd has actively been reaching out to its customers to sample their opinions in a survey and it is attested that more 60% of its customers are happy with their services (PowerGen, 2009).
2.5The Triple Bottom Line Concept
John Elkington (2004), the brain behind the sustainability concept, argues that an enterprise like PowerGen Plc Ltd has to meet a ‘Triple Bottom Line’ of economic, social and , environmental aspects.
Figure 3: The Triple Bottom Line
Economic responsibility aspects include profit making, and investment measurements etc. Environmental responsibility aspects include issues like impact on land, air and water. Whist social aspects include workforce health and safety, and community relations.
PowerGen Plc Ltd `s commitment to community and environmental policies is proven in their renewable energy scheme/programme known as PowerGen Renewable whose main feature is the production and monitoring of energy.
Energy sources today are generally believed to affect the environment with the gradual upsurge of temperatures commonly known as global warming. Boyle (1996) argues that such emissions are as result of the emission of carbon monoxide and sulphur dioxide from the burning of fuels, though there are global warming sceptics who would refute this.
Renewable energy sustains solutions to several environmental, health social and many other prevailing problems and it is derived from “the sustainable currents of energy from the natural environment in the United Kingdom.” (Twidell & Weir, 1986:3)
PowerGen Renewable is making a great contribution to the growth and constant supply of energy and stand firm to remain Uk`s main leading green generator as per their commitment since the year 2002.
Other sources of power include the Hydro electricity power from the renewable energy scheme which comes from the water cycle and is nothing but the interrelated actions of filtration of rain water, water vapour from (run offs, seas and rivers) through precipitation.
Hydropower is generated by the use of kinetic energy derived from moving water derived from the water cycle. The process involves capturing water and turning it to produce electricity. PowerGen Renewable uses two types of hydro power: one on a large scale, and a smaller scale run-of-river scheme. The large scale power project is located near Aberystwyth and has three large reservoirs of water generating electricity. The small-scale ‘run-of-river’ hydro electric scheme located at Pen-y -Bont in Snowdonia and it uses a water turbine to convey running water of the Tyn-y-ddol River.
It is revealed due to this active involvement of PowerGen activities that there is some hurt or obstruction caused to aquatic ecosystems (Kelly et al., 1993).
Water quality is a major cause of concern as the turbines take a low level of oxygen being passed across the turbines and thus affect aquatic life that depends on the oxygen.
Another option PowerGen renewables employs is by running the biomass or coal power stations which involves using energy produced from organic (plant or animal) gaseous or liquid fuels, and according to reports biomass is experiencing a renewed interest, which accounts for 15% of the worlds energy use, up to 38% in developing countries (E-sources, 2004).The figures will likely be higher than that this year.
The customary use of biomass has some adverse effects on the environment or society in air quality, but if properly used it can be useful in greenhouses.
PowerGen Plc Ltd Community Involvement
In the UK alone, PowerGen employs about at least 7000 staff to help fulfil its goals or objectives expected, their community outreach schemes are mainly focused on its staff and it is actively engaged in making sure its operations are sustainable. It has set up a Wind Farm in East Yorkshire (PowerGen 2004). Moreover, it ensures its existing use of renewable fuel sources are helpful to the immediate environment where its operations are concentrated. It operates contractual alliances or partnership with both voluntary organisations and other authentic and reliable consultant companies who specialise in the services they need. It also welcomes free visitors, about 19,000 in 2002) to visit plants it operates. PowerGen funds several other educational initiatives in several communities, including Nottingham where it has joint projects with Nottingham Trent University.
In conclusion, PowerGen is actively involved in community welfare and has adopted a participatory approach to work in the community, in the sense that most plans that are made involve suggestions that the community gives. However, those that PowerGen approves are beneficial to them too, as well as giving staff and customers a sense of belonging to PowerGen – a sense of ownership – which is a good customer service approach. Moreover, there have been various investments which mean that PowerGen has needed to go and ask the customers for extra charges, but it ensures in such case the elaborate explanations are given (Kemeny 2004) .
It is hard to say PowerGen Plc Ltd does not need improvements to its operations so far; for instance, as new staff come in, they will require even more dedicated and targeted training about sustainable issues. The business world is becoming more and more competitive, and that places more pressure on PowerGen because customer needs are even becoming more ‘green’ than ever before. In fact, a company promoting itself as environmentally responsible and interested in sustainability management is no longer a choice: it is an essential part of effective business management these days.
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