Corporate Social Responsibility and Environmental Issues
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Part 2 – Rolls-Royce CSR Strategy
The world is changing and it is recognised that human behaviour increases the level of greenhouse gases in the atmosphere which contributes to global climate change. With the population constantly rising there is a growing demand for energy, trade and travel. Rolls-Royce recognises these effects and as a leading power systems provider they have an essential role in meeting the social and environmental opportunities and challenges that the world faces.
Part 1 – Investigation
One of the concerns that the world faces is the growing demand for travel. It is estimated that year over year there is a 7.3% increase of people travelling by air. In 2017 a record breaking 4.1 billion passengers flew on a scheduled airline. With the population increasing, this figure will only continue to rise. This causes problems to the environment as the Carbon Dioxide (CO2)emissions from aviation fuel is 3.15 grams per gram of fuel and 115g per passenger per km. Therefore the emissions are around 90 kg CO2 per hour. (Rosen, 2019). The amount of CO2 emitted can have numerous effects on the planet, such as sea level rise, increased extreme weather and ecosystem changes. Carbon Dioxide is the largest greenhouse gas emitted by human activities (See Figure 1) therefore it is vital to reduce this.
Figure 1 – pie chart to show global greenhouse gas emissions
In order to reduce these emissions research and development (R&D) must be carried out which is why Rolls Royce spend 1.3 billion on R&D a year. (Rolls-Royce, 2019). This investment resulted in the idea of electrification as it offers an opportunity for sustainable growth, reduced carbon emissions and an innovative change in the way the world is powered. An example of how Rolls Royce has committed to this innovation is the MT-30 engine as it uses hybrid-electric propulsion. Rolls Royce has a target to reduce CO2 by 75% per passenger across the aerospace sector by 2050. (Rolls-Royce, 2019).
For Rolls Royce to achieve this target, ISO 14000 can be applied. The ISO 14000 standard encourages environmental consideration in all areas of a business by the use of basic continuous improvement. The Deming Cycle, also known as PDCA is a fundamental understanding behind the requirements stated in ISO 14000. This is shown in Figure 2.
Figure 2 – PDCA Cycle (Mind Tools Ltd, 2018)
Rolls-Royce adopts a continuous improvement approach throughout the company which allows employees to speak up and make changes to improve the products and the processes. Once a change has been suggested the PDCA cycle is implemented; a plan of action is determined and validated and then it is implemented. The change is then monitored and evaluated over a long period of time as this will measure the effectiveness of the change. If the change has been deemed as a success then it is shared across affected areas so that improvement is made throughout the company.
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Rolls-Royce used this tool with the MT-30 engine however this model can be used further to come up with new and improved solutions to tackle electrification. Rolls-Royce has a mission to be number one in the world in megawatt-class aero-electric power and a leading provider of hybrid industrial power systems. To maintain a competitive edge, Rolls-Royce has to invest in innovative technologies. They are currently developing a range of hybrid technology such as the E-Fan X and the all-electric project know as ‘Accelerating the Electrification of flight (ACCEL)’ which is part funded by the UK Government. Both of these projects are currently in the ‘plan’ and ‘do’ phases
According to most recent reports conducted by ISO, there are 14,000 companies worldwide certified to ISO 14000. The majority are in Japan, Germany and the UK; this indicates that organisations are aware of environmental issues and are trying to do something about it. (Environment, Health and Safety Online, 2016)
Raw materials are extracted for the production of goods and services however the extraction of raw materials is responsible for half of the planets carbon emissions. One way to avoid extraction and the production of primary products is to recycle; this also avoids the emissions from disposal, typically the anaerobic biodegradation at landfill. However the recycling process also causes carbon emissions therefore it is only favourable if the process emits less greenhouse gas than landfill. Two thirds of landfilled waste is biodegradable which releases huge amounts of Carbon Dioxide. This results in decreases the quality of water and air in the area.
Rolls-Royce has taken the initiative to reduce landfill emissions as they have set a target to achieve zero waste to landfill by 2020. Rolls-Royce has already implemented some changes to achieve this; they have bought in a new bin system which encourages the employees to recycle.
A more extreme way that Rolls-Rolls could implement to reduce carbon emissions is to create a program where the aim is to recover, recycle and reuse virgin materials. This would benefit Rolls-Royce as extraction is expensive and there would be a significant environmental impact. Research suggests that almost 95% of a used aero engine can be recycled and around half of the recovered material can be safely used to make a new engine as it would be of such a high quality.
In order for this to be possible Rolls-Royce need to undertake a product lifecycle analysis as this will highlight key areas where a product may be generating waster or damaging the environment. This creates sustainable development. See Figure 3.
Figure 3 - (University of Derby, 2019)
The target for Rolls-Royce is to improve the end of life of the product. End of life is a point in time where a product no longer satisfies the first user. Rolls-Royce can use End of life strategies such as recovering products at the end of life by reusing, recycling, and remanufacturing. This creates a circular economy as opposed to a linear economy (See Figure 4). Ellen MacArthur defines circular economy as, ‘is one that is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.’ (MacArthur, 2015)
It is important that we move towards a circular economy as with the world’s population growing there is a higher demand for raw materials, however the supply of crucial raw materials are limited. This could deliver the benefit of reducing pressure on the environment and stimulating innovation. It also reduces the global risks, in terms of likelihood and impact. For example it reduces the risk of natural disasters and failure of climate change mitigation and adaptation.
Figure 4 - (University of Derby, 2019)
Part 2 – Rolls-Royce CSR Strategy
Corporate Social Responsibility (CSR) is defined by the UK Government as, ‘the responsibility of an organisation for the impacts of its decisions on society and the environment above and beyond its legal obligations, through transparent and ethical behaviour.’ (Gov, 2014).
A company can strengthen its image and brand by being socially responsible which can boost employee morale. This leads to greater productivity within the workforce. The main focus of CSR is to ensure effort is made by a company to improve society and contribute to sustainable development. (The Giving Machine, 2018). It is important for companies to realize that businesses do not exist in isolation and that there is an impact on the wider world. Therefore a company should put themselves in the centre of their influences. (Liyanage, 2019). This is illustrated in Figure 5. Expand
Figure 5 – csr middle position (Liyanage, 2019)
CSR can be split into three different areas, these are; social, environment and economic. This can then be furthered separated and evaluated. This is shown in Figure 6. This allows for companies to highlight the areas that need improving. For example to assess environment impacts, a life cycle analysis can be conducted. M.A. Curran states, ‘LCA is an environmental accounting and management approach that considers all the aspects of resource use and environmental releases associated with an industrial system from cradle to grave.’ This ensures that the supply chain use sustainable sourced materials and considers a products end of life.
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The social dimension of CSR covers human rights, labour and workplace activities and community involvement. One way that Rolls-Royce shows compliance to its social strategy is the outreach activities that centre Science, Technology, Engineering and Mathematics (STEM) subjects. At Rolls-Royce there are over 1400 STEM ambassadors all over the world who design activities to promote the subjects to young people, typically females in order to tackle of gender diversity within engineering. In the average workplace in engineering only 13% of the engineering workforce is female. (Dizikes, 2106). In the UK at Rolls-Royce the total female workforce stood at 15% which is better than average. (Rolls-Royce, 2018) Finally the economic side of CSR relates to long term growth and contribution to economic development. (Expand)
Figure 6 –CSR breakdown (Liyanage, 2019)
Benefits of CSR
CSR provides many benefits to a company such as creating a positive image; this creates a competitive advantage as they can be favoured over a company that does not practice CSR. (NI Business, 2018)
CSR also provides other benefits such as:
- Enhanced relationships with stakeholders
- Access to funding opportunities
- Increase in customer retention
- Increase in workforce retention – a good CSR strategy will motivate staff as effort is being made by the company to focus of social aspects. This will save the company money as they will not have to re-train staff.
- Differentiating yourself from the competitor
How do the solutions in Part A contribute to Rolls-Royce CSR Strategy
Rolls-Royce has an annual turnover of £11,124 million and a profit of £848 million. (Student Share, 2018). They have committed to use new approaches and technologies to ensure sustainable economic growth. The sustainability programs take into account the environment, its people and the communities it operates in. Roll-Royce has a strategy that focuses on three main areas:
- Reducing environmental impacts of activity
- Reducing environmental impacts of product
- Developing new low emission and renewable energy products
(Student Share, 2018)
Many companies, including Rolls-Royce are concerned about the amount of greenhouse gases produced therefore as previously stated, Rolls-Royce are working towards electrification to reduce the CO2 emissions produced. Consumers appreciate the efforts made by a company therefore it is known that greenhouse gas emissions are closely related to social responsibility index rating. It is important for Rolls-Royce to investigate their CSR rankings as it has been proven to be significant for a company’s profitability in the long run. If a company’s CSR increases so does the social reputation of the firm as customers are more likely to express an interest.
Rolls-Royce has a CSR/ESG Ranking of 94% compared with 17,408 companies. (CSR Hub, 2019) This is illustrated in Figure 7.
Figure 7 - Rolls Royce csr, esg rating (CSR Hub, 2019)
Looking at the data in Figure 8 there is a significant increase required in all areas. The energy and climate change is the key focus in this report as it is important to create a sustainable world as greenhouse gas emissions affect the world massively. ‘The energy and climate change category in Figure 8 measures the company’s effectiveness in addressing climate change through appropriate strategies and policies, energy efficient operations and the development of renewable energy. This category also includes energy use, emissions to air CO2 and other greenhouse gases.’ (CSR Hub, 2019).
Figure 8 - In depth view at rolls Royce csr data (CSR Hub, 2019)
200 million metric tonnes of waste is produced in the UK alone every year. (Coombes, 2018). This figure highlights the need for people to create a strategy to reduce this significant number. Recycling saves a substantial amount of energy and emissions compared to producing new materials from raw natural materials.
Rolls-Royce has corporate social responsibilities that they are expected to follow in order to operate ethically and legally. Reducing carbon footprint and the amount of waste and emissions produced is an important part of this. Roll-Royce’s new program to recover, recycle and reuse, responsibly manages the waste and therefore guarantees that Rolls-Royce fulfils its corporate social responsibility; which minimises the likelihood of consumers feeling distrust towards the company.
In today’s world it is important that Rolls-Royce promote the good work that they do on social media and the internet as it shows the company operating ethically and sustainably. This would result in Rolls-Royce maintaining a good reputation which increases consumer confidence and retention.
For Rolls-Royce to succeed, it is important that the principles for CSR to be followed. For example when developing the electrification products, they must constantly provide secure and safe services and products to resolve the customer’s issues. Whilst complying to this guideline they must comply to code of ethics, human rights and many more.
To conclude, Rolls-Royce copes very well with new challenges whilst managing to limit the environmental impact. To succeed as a company, it is important to continually improve. ISO 14000 provides different tools to drive this. Similarly Rolls-Royce must contribute to Corporate Social Responsibility as this brings many of advantages to a company, such as increasing customer retention.
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