Corporate strategy is an important planning process within a company that links strategies with functions of corporation. Nowadays, social responsibility has developed rapidly and corporations are pressured to do their part in conserving social, economic and environment. Handel is now in the verge of integrating its social responsibilities into its corporate strategies for the group. Part of this process can be derived and analyzed from the case study which I have extracted to explain below.
Handel is a family owned international corporation that has an ownership of ever 600 family members.
Handel has Strong desire for low risk investment and had been looking for ways to diversify its current portfolio. At present, as a family run company, the family has decided to let outsiders to run the operation in order to be transparent on corporate governance and at the same time maximizing shareholder wealth. I think the management first challenge is to face Handel’s big group of diverse shareholders.
Each shareholder will have different perspectives and references.
As Handel employs external managers to run the business, the external team still needs o meet the shareholder’s demand from the shareholder’s meeting. Diversity of shareholders maybe resulted in many different objectives the shareholders wanted to deliberate, discuss or to be agreed and carried forward by the management. Sorting out the shareholders need and wants in accordance to priorities is already a huge challenge.
Engaging these shareholders to derive a clear policy on strategies is another challenge. Family members who are shareholders only meet at the shareholder meeting for briefing and finalizing several policies and time factor is the main constraint.
Challenge can be observed from financial perspective. Handel commonly gives 25% of the Group’s annual net income to family members. Family members are only accepted to sell or transfer Handel shares to each other to maintain the family owned corporation.
This clause will under all circumstances plough away certain proportion of the profit from reinvestment in business. This clause also has made the matter worst when financial results showed reduction of profits and cash flow for the last few years. The financial overview as shown in the financial report highlighted poor performance from investments, dividends, profitability and cash flow etc. These challenges also lead to the management to seek diversification of its current projects to cut risks. Diversified and restructured portfolios are the aims given to its management.
However, diversification will lead Handel to face another challenge for management as they need to source out for the right investment and business for entire Handel Group. This challenge is made more difficult in the poor global economic performance recently, and Handel’s team needed to handpick the right company for investment. As Handel now favors more small but innovative company who has yet to make its mark in the market, the worrying question is how many of them can really succeed. Handel is a family owned corporation, so it generally considers as safe investments and the managements have been avoiding venture capitalists.
But in doing so, the management needs more attention to divest their investment in smaller investments and extensive monitoring, staffing and meeting may be required. Ill. THE ALIGNMENT OF HANDEL’S CORPORATE RESPONSIBILITY STRATEGY AND CORPORATE STRATEGY Corporate responsibility and sustainability are both important roles for Handel to achieve higher competitive advantages in market. Corporate social responsibility seems a fundamental component of corporate strategy. It reflects that Handel focuses on its stakeholder and strategy.
Through Handel’s survey, corporate social responsibility was regarded as a significant strategy for Handel Group where business life cycle Were observed, divisions played the importance of sustainability leading to an increase of media attention. Besides, Handel has five divisions that have different regional focus, business models and value chains. Each division also has individual corporate responsibility activities. Lately, Handel creates an umbrella function to take into account the new corporate responsibility for combine the adjustment of the business portfolio.
The new corporate responsibility is a common corporate responsibility strategy and an explicit framework which can be aligned by adopting a common Handel value. Handel combined corporate strategy with corporate responsibility strategy rooted by Christian ethics and characterized by the representation of the “respectable salesman”. A common value will help to share common understanding between corporate strategic planning and corporate social responsibility planning. At the end of 2008 Handel created small team at the corporate center to align the corporate strategy with the development of the corporate accessibility strategy.
This activity applied “triple bottom line” on Handel’s main corporation strategy which wanted the group to look into ups (product, planet and profitability), where product and planet belongs to corporate social responsibility. Handel harmonize the needs of environment, customers and company by applying corporate responsibility to corporate activities “along the value chain” and “beyond the value chain”. Handel Group Conference managed the corporate responsibility strategies reflected by the annual top management meeting. Finally, Handel has the Sustainability
Council to ensure that corporate responsibility and corporate social responsibility are both aligned and systematically implemented. Handel is also aware of the understanding Of the sustainability strategy which gives benefits for stakeholders in order to align with its corporate strategy in long term goal such as expandable market consumption. IV. MEASURING INDICATOR FOR HANDEL Each division has different structures and roles but divisions can work together to focus on sustainable business. Handel’s corporate responsibility strategy follows people-planet-profit approach (UP).
Therefore, I think this treated can be measured by the criteria of Global Reporting Initiative (GRID). GRID 3. 1 is the current tool for guidelines in preparing the report for sustainability. The criteria of GRID 3. 1 are used to evaluate Handel’s corporate responsibility strategy performance. I detect the ups strategy above will link to employees (appendix 1), added value chain (appendix 2), innovation (appendix 3) and charitable efforts. According to Labor Practices and Decent Work in GRID 3. 1, Handel improves internal education options introduced by an international management system.
This system provides for employee raining (LAB, 10). Environmental and safety standards are also to be raised. Handel identifies potential sources of risk to avoid accidents (49). Next, Handel gives benefits of pensions for employees in order to make a good work-life balance (ALAI). Additionally, environment is an important issue nowadays; therefore, Handel understands to protect resources. The holding company provides a green car policy to reduce CA limitation (KNEE). Employees who take company car not only save money for yearly railway’s ticket but also contribute to their private pension.
Green car policy is friendly tit environment (EN) in order to decrease fuel consumption and greenhouse gas emission (EN 18). Through Handel’s innovation, it optimizes sustainable balance and business model on service logistics, the recycling of raw materials, expansion of green products and transparency in the supply chain. These innovations support Handel to get customer’s satisfaction by reducing service trips. Handel also promotes human environmental awareness by recycling scraps. Handel focuses on global technical solutions (I. E. The product category of fish) by working with industry partners to prevent illegal behaviors (I. E. Legal fishing). Besides, Handel has contributions to society and economy (SEC 1 Handel has donations to schools and hospitals (I. E. In Disturb-Router). Handel also provides voluntary social benefits (I. E. Workers housing estate and company health insurance). Furthermore, Handel has collaborations with universities to offer practical courses. Handel supports regional education projects by awarding scholarships (OSI These are some contributions that Handel should sustain these activities to raise its corporate responsibility strategy. Final, Handel should refer on criteria of GRID 3. 1 to enhance corporate sustainability responsibility.
V. HANDEL’S SUSTAINABILITY SCORECARD In 2010, Handel focused on sustainable business associated with M&A activities may require to find a new tool to measure sustainability. A new tool should measure whether Handel has fulfilled then necessary criteria Of the UP model. At that time, the project team mentioned a “public value scorecard” that links UP model into five dimensional frameworks (instrumental, financial, economic, political-social, moral-ethical and hedonistic-aesthetic values). Handel used sustainability scorecard to address internal and external perspectives from different stakeholders.
Here, simple questionnaires are provided to stakeholders to collect viewpoints in order to improve environmental sustainability. In addition, sustainability scorecard can measure the value of financial contribution. Handel estimates risks and costs in product lifestyle to eliminate waste in the supply chain. Scorecards are used by employees and customers to evaluate Handel’s performance footprint. Moreover, sustainability scorecard is a measurable instrument with regard to political, moral, hedonistic and utilitarian aspects. Handel uses scorecards such as surveys, assessment or codes of product to understand social perspectives.
Thus, Handel can make suitable decisions with corporate responsibility strategy. Sustainability scorecard is a significant part of corporate social responsibility. In recent years, multinationals and government organizations are using sustainability scorecards to focus on both quality management and environmental change as both are becoming a serious issue. Hence, supplier scorecards have been issuing in accordance with quality management and social compliance. Handel can apply the scorecards as a sustainable tool to achieve community engagement and fair labor practices.
The scorecards are seemed to provide feedbacks and can also be used as source for data collection from stakeholders to assess energy use and other emissions. Handel’s sustainability scorecard is a suitable tool to measure sustainability for elaborate comprehensive corporate strategy. VI. THEORIES ABOUT CORPORATE ATTITUDES TO CORPORATE SOCIAL RESPONSIBILITY REPORTING Charles Handy emphasizes two main points concerning environmental and individual well-being. A business not only makes a profit but business is also expected to do something more and better. This activity becomes the actual justification for the business.
Next, a company will get worse when it normally considers its employees as costs (not assets). The regularly purpose of a company is trying to minimize costs and grow assets. “A good business is a community with a purpose, and a community is not something to be ‘owned’. ” According to Charles Handy. There are a lot of highly skilled employees, so they should be treated as assets. A good business should maintain and attract these employees to raise an efficient performance. Otherwise, Charles handy claimed that employees have contribution in production by their skills whilst stockholders have undistributed investments by their funds.
Thus, a company is just fair when it pays dividends for both employees and stockholders. In fact, the company does not pay any dividends for employees and only provides more benefits of dividends for shareowner. A good company should create wealth community in workplaces to improve its performance. The company also base on the individual needs to engage its stakeholders. According to Muhammad Yuan’s, the purpose of social enterprises is trying to provide social responsibility to poor people who are in need of help, including revision of cheap price goods and services for poor people.
A social business does not focus on profit minimization. It just serves products to everyone can use. Social enterprises provide products with cheap price to raise poor people at the bottom of the pyramid. This is also a strategy to branding and increase market consumption behavior (I. E. Deanne provides yogurt in Bangladesh). Besides, a social enterprise can reinvest what it earn in social business to increase facilities in order to provide jobs for employees in where it operates. Hence, poor people can improve their income in order to raise life level. Social business is not charity.
It creates a system chain of making profits, reserving and recycling profits respectively to sustain its operation in meeting the objective of social responsibility. From Muhammad Yuan’s model to Charles Hand’s model, a corporation needs a social enterprise for balance in order to create new objectives. Social responsibility provides skills to employee’s organization as well as increases customers.