Approaches To Sustainable Development And CSR In Engineering: A Critical Evaluation

Summaries of the approaches

In recent years, most of the organizations have been focusing on the sustainability in align with the experience of high-profit margin. In this report, the discussion is focused on several approaches to the sustainable development that helps the managers in analyzing the business growth and performance in light with clean growth agenda (Carroll, 2015). For gaining explicit insights, the major six approaches has been discussed below which are – The triple bottom line, the five capitals, natural capitalism, cradle to cradle, the circular economy and the balanced scorecard (Young, and Makhija, 2014). These all approaches can help the manager in assessing the business performance with the objective of achieving clean growth.

The above approaches are summarised in the context of sustainable development by reviewing various academic works of literature and journals.

• The Triple Bottom Line– This approach is based on an accounting framework which includes three dimensions of performance i.e. social, environmental and financial. These dimensions are also commonly known as three Ps: people, planet, and profits. This approach can be difficult to measure because while the issue of profitability is black and white, what constitutes social and environmental responsibility is somewhat subjective. However, various local and federal governments adopt this approach as it creates a sustainable local economy in relation to environmental quality, economic prosperity and social equity (Sarkis, and Dhavale, 2015).
• The five capitals – This approach can be used in an organization with an integrated management system i.e. mostly in practical ways. It is also a very useful tool in the evaluation of development projects. The framework of this approach includes – Economic capital, Built capital, Human Capital, Social Capital, and Natural capital. The significance of this model can be defined in its capability as each of these forms of capital delivers certain benefits or ‘flow’ in economic terms. It also leads to a hypothetical model of sustainable capitalism (Lobato, et al., 2015).
• Natural Capitalism – Natural capitalism is a much required holistic approach during the course of framing various policies. Radically increased resource efficiency is the first principle of Natural Capitalism. This approach not only provides increased in the profits but also delivers the necessary solutions to most of the environmental dilemmas in the context of sustainability. According to this approach, the structure of the economy can be changed if one can eliminate the concept of waste through the help of redesigning of the economy. This approach also focuses on raising resource productivity (Bocken, et al., 2014).
• Cradle to Cradle – Many companies are moving to a new agenda of environmental sustainability so that to behave effectively in the environment of advances in technology and the rising consumption during the course of resource depletion and climate change. Cradle to Cradle is a sustainable business strategy that mimics the regenerative cycle of nature in which waste is reused. The main objective of this sustainable strategy is to reduce waste and thus increase the performance of the organization (Tagliaferri, et al., 2016).
• Circular Economy – The main features in the circular economy is proposed with a focus on industrial economics. This approach is also called as a regenerative system which is made with a long-lasting design. The paradigm in this approach is based on reduce, reuse, and recycle. Unlike the other business model, this approach is a substantial improvement common to both organization and consumer. In addition, many organizations believe that implementing this system help them in reusing the resources in a much cost-effective manner rather them generating them from scratch. Moreover, the prices of products will also be reduced which impact the sales price and the final consumers (Murray, Skene, and Haynes, 2017).
• The Balance Scorecard – The Sustainability Balance Scorecard (SBSC) focused on three different perspectives i.e. economy, ecology, and society, unlike the standard Balance Scorecard that focuses on the implementation of the strategy on an operational level. This new balance scorecard provides the business firm an ability to evaluate the contribution of sustainable development to their goals. This makes the differences to be added upon in the bottom line of the organization and thus increases performance (Valmohammadi, and Ahmadi, 2015).

Hertz is leading the international car rental industry. Being a part of service providing industry Hertz focusses on quality and efficiency of their services. In recent years, the company has started serving the insurance replacement and hourly rental car share service as well. Along with rental cars, some additional services making their car rental service more efficient are also initiated by the company. All the services provided by the company are supporting the circular economy and balanced scorecard approach for a sustainable development of the business (Hertz, 2018a).

Businesses like Hertz are becoming increasingly sophisticated to understand and implement the corporate social responsibilities through their business model. Businesses in recent years are implementing these corporate social sustainable principles at the core of their business model for sustainability purpose. In this context circular economy is getting more and more attention for sustainable development of business along with fulfilling the corporate social responsibilities (Zhao, Zhao, and Guo, 2017).

The circular economy is all about managing the available resources with maximum efficiency throughout their lifecycle. This model suggests closing a linear business model to form a loop and turning the waste into resources. This business model consists of repairing, recycling, and refurbishing or the existing materials to maximize their lifelong efficiency. This clears the main purpose of this approach as maximizing the use of assets and resources available.

Rental car business of the company consists of renting an asset that is not affordable or suitable for the consumer to purchase. This service is open to individuals, businesses, and organizations. The central idea of this business system is to purchase an asset from parental manufacture as per customer requirements and in the return customers pay a fixed rent monthly. This business system provides many benefits to its customers like an access to the latest models, budget control, avoiding the purchase and resell of a car, and optimized cash flow along with certain tax incentives. Rental or leasing system has become a lever to the circular economy as aligned with the sustainable development of a business. This system aims to maximize the reusability of products and raw material. Along with these benefits, the rental system has provided an alternative to the existing classic “make, use, toss” model with the help of providing a reuse option. This alternative is based on repairing and reselling of the products.

The Circular Economy and Balanced Scorecard approach to Car and rental business provided by Hertz

Hertz’s rental car business has taken the responsibility of providing eco-friendly transportation to its customers. In this context to reflect their responsibility company has introduced hybrid and flex-fuel vehicles. With these vehicles, their customers get a chance to go eco-friendly along with saving money by investing in gas fuel. In addition to this, the company uses eco-friendly or environmentally safe cleaning products for their care repairing purpose. This business also consists of many risks related to the damage insurance for both the customers as well as the vehicle. These risks make a significant impact on the concept of a circular economy.

Business sustainability or corporate sustainability is often defined as managing the triple bottom line process, a process that is used to manage the financial, environmental, and social opportunities as well as obligations. The coordination of these social, environmental, and financial elements is essential to ensure a responsible and ethical on-going success of the business. The social, environmental, and financial demands of a business are considered as three pillars of sustainability for a business. The triple line approach evolves planning, managing and reporting of business results in three areas:

Economic: Profits, sales, jobs created, cash flow, ROI

Environmental: Impact on air, water, waste generation, energy use

Social: Community impact, human rights, product responsibility

To understand the alignment of business sustainability or corporate social responsibility with overall business strategy, the balanced scorecard is the best option. A strategic balance scorecard involves the firm’s collaborative development to identify the connection between efficient business processes, organizational capacity, stakeholder satisfaction, customer values, and market and financial outcomes of the business. A balanced scorecard uses four strategic perspectives to make a business sustainable that are financial, customer, internal process and organizational capacity (Valmohammadi, and Ahmadi, 2015).

Financial: Financial perspective involves different operations to increase the profitability and revenues of the business. Along with an increment in these elements it also focuses on reducing the product cost and risks associated with the business model.

Customer: This perspective includes the improvement of customer values and its stakeholder relationships. These operations are important from the business reputation point of view to enhance the brand values of business in the respective industry.

Internal process: In this perspective innovation, operational efficiency, and partnering capabilities are included. These strategic operations are essential to strengthen the business in every aspect of the business operations.

Organizational capacity: This perspective of the balanced scorecard deals with the cultural as well as information technology improvement of the organization.

Hertz is improving its business sustainability to meet the corporate social responsibility to grow its business for the future. Balance scorecard approach helps the organization to achieve the desired performance, improve its financial performance, to explain the staffing strategy used by the company, align the staffing strategy, and to allocate the resources of the company in an efficient manner. The company tries its best to keep their car fleets on rent as much as possible to ensure the elimination of any cycle time and throughout costs. In the perspective of internal business factors company has worked on its productivity, quality, cycle time and throughput. All this is achieved by adjusting the business schedules. In order to improve the quality factor of the business company has initiated multiple customer service programs for its employees while dealing with the business-related operation. Also, the company tries to keep its car fleet on rents as much as possible so that the cost of cycle time, as well as throughput, can be eliminated (Hertz, 2018b).

Circular economy

Along with such advantages, the approach or balance scorecard has some disadvantages as well. In this list of disadvantages of balanced scorecard approach, the first thing is it takes forethought. It states that the approach is not a tool to give a quick thought it’s a strategic process including proper planning and goals set to be accomplished through the strategic balance scorecard. Also, the approach is centralized over the three perspectives of the business which are now sufficient to evaluate the whole business. And moreover, companies use some matrices that are not applicable to their own situation. Therefore, while using a balanced scorecard approach it is required to track the information only required to the accomplishment of organizational goals.

Both the circular economy and balanced scorecard approach ensure the sustainability of a business model. Although these approaches are used for a common purpose of making a business sustainable, their processes differ from one another. Circular economy makes the business use its resources in such a way that it impacts the environment in a positive way whereas balance scorecard is a strategic planning for business evaluation to grow successfully in terms finance, social and environment. In this context, the circular economy approach avoids the financial perspective. Circular economy focuses on eco0friendly business whereas balance scorecard looks for an overall collaborative development of the business (Zhao, Zhao, and Guo, 2017). Here in case of Hertz’s business of rental cars circular economy approach is reflected more in comparison to the balanced scorecard approach. This is because the business development in recent years shows a more eco-friendly approach compared to a strategic balance scorecard approach. Their implementation of hybrid bards and enhancement to the use of flex-fuel reflects their actions for the circular economy. While only a few implementations like online mobile application for booking shows the balanced scorecard approach. In this context, the theory of corporate social responsibility and their approaches concludes that a strategic balance scorecard approach is more effective for sustainability development. On the other hand, a circular economy approach is restricted to only the environment-friendly used of resources.

This concludes that corporate social responsibilities are an important part of the sustainable development of an organization. Also, different approaches of CSR are used in different perspectives as per their requirements. Among all these approaches, Hertz uses a circular economy approach as well as a balanced scorecard approach to enhance its sustainable development in the rental business industry in the international market.

References

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Carroll, A.B., 2015. Corporate social responsibility. Organizational dynamics, 44(2), pp.87-96.

Hertz, (2018a) About Hertz, [online]. Available from: https://ir.hertz.com/company-overview [Accessed on 04/11/2018].

Hertz, (2018b) Hertz, [online]. Available from: https://ir.hertz.com/?_ga=2.133764366.1651011530.1541222281-1789416710.1541222280 [Accessed on 04/11/2018].

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Tagliaferri, C., Evangelisti, S., Acconcia, F., Domenech, T., Ekins, P., Barletta, D. and Lettieri, P., 2016. Life cycle assessment of future electric and hybrid vehicles: A cradle-to-grave systems engineering approach. Chemical Engineering Research and Design, 112, pp.298-309.

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Young, S.L. and Makhija, M.V., 2014. Firms’ corporate social responsibility behavior: An integration of institutional and profit maximization approaches. Journal of International Business Studies, 45(6), pp.670-698.

Zhao, H., Zhao, H. and Guo, S., 2017. Evaluating the comprehensive benefit of eco-industrial parks by employing a multi-criteria decision-making approach for the circular economy. Journal of cleaner production, 142, pp.2262-2276.