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To what extent are car manufacturing firms operating in a more socially responsible manner when designing environmentally friendly cars?

Abstract

Social responsibility is one of the key differentiators between modern corporations, and is seen by many analysts as an antidote to the past few years' trend towards the demonisation of corporate institutions. The recent economic crisis, in particular, has led many observers to argue that corporations that fail to address issues of social responsibility will struggle to survive. However, other observers question whether this phenomenon is anything more than a superficial consumer trend, and whether the world economy in general can seriously contemplate a corporate system in which the profit motive is subservient to the need for corporate social responsibility. This dissertation examines social responsibility in terms of the car manufacturing industry, and looks in particular at the question of whether or not the move towards environmentally friendly cars is anything more than a passing phase in an industry that is extremely sensitive to public opinion. Ultimately, the aim of the dissertation is to determine whether or not corporate social responsibility within the car manufacturing industry is a genuine change, or whether it is simply a superficial response to a passing public trend.

Introduction

The concept of corporate social responsibility has been one of the dominant themes of the past decade, with consumer recognition of a corporation's social responsibility being increasingly seen as a lucrative phenomenon. In the west, in particular, increasing levels of affluence have led to a trend that has seen more customers show willingness to pay more for products that are designed according to theories of social responsibility., and this shift has been nowhere more apparent than in the automobile manufacturing industry. This trend has inter-cut with a recognition (in some quarters) of the need to ensure a more environmentally-friendly approach to industrial production and consumption, and a number of corporations have secured dramatically enhanced public images through a focus on affordable but socially responsible products. However, critics argue that since the primary aim of these corporations is to increase their profits, the appearance of social responsibility has been more of a cosmetic change than a substantial alteration of core business practices; many critics believe that corporations have, in most cases, merely become better at packaging their products as a more socially responsible, environmentally friendly alternative. Despite the recent financial crisis, the automobile manufacturing industry remains a bellwether for the global economy, and any genuine global industrial changes regarding social responsibility will likely be evident in the automobile industry at an early stage.

This dissertation will examine the behaviour of car manufacturing firms and will ask whether they have genuinely become more socially responsible when designing environmentally friendly cars, or whether this is merely a superficial smokescreen designed to generate improved public exposure without leading to genuine changes in design and production philosophies. In particular, the difference between the industry's approach before and after the onset of the recent economic crisis will be examined, and these differences will be used to determine whether or not the move towards social responsibility represented a genuine change to production systems or was merely an attempt to capture the early twenty-first century zeitgeist. Furthermore, the dissertation will examine the extent to which social responsibility and environmental awareness have affected not only above-the-line (i.e. visible to the public) areas of the industry, but also below-the-line (i.e. internal corporate) systems; the dissertation will argue that firms can only be said to have adopted a greater level of social responsibility if their attempts to tackle this issue extend to below-the-line activities. The dissertation will use a series of core examples in order to determine both the hyperbole (i.e. the claims made to the public) and the core below-the-line changes that may, or in some cases may not, reflect the car manufacturing industry's more socially responsible, environmentally friendly approach to business and production.

Literature Review

Corporate Social Responsibility

Social responsibility has been one of the key growth areas in recent years. Crane et al. (2007) define social responsibility, in the corporate context, as "a company's ability to put aside the profit motive in order to perform tasks that have a beneficial effect not on the company itself - in terms of capital - but in terms of an entirely separate social group" (Crane et al., 2007, p. 6). In this context, social responsibility can be seen as something that companies are expected to do unbidden, in much the same way as many people choose to donate their time and volunteer to help charities. In some ways, therefore, social responsibility can be seen as an attempt to anthropomorphise corporations by rendering them indebted to a cultural belief that they should act in a more ethical and moral manner. This is in some ways a cultural corrective to the idea of corporations as solely capitalistic, profit-orientated organisations.

May et al. (2007) suggest that corporate social responsibility is a popular construct that seeks to imbue corporations with humanistic traits "regardless of whether those traits are present or not" (May et al., 2007, p. 118). In order for public recognition of these traits to be tangible, there must be a relative relationship between different corporations, so some must be seen to be exercising a great deal of social responsibility, while other must be seen to be doing very little. This is, in effect, the classic polar relationship between 'good' and 'bad', and it allows consumers to associate themselves with positive, socially responsible companies purely by making certain purchasing decisions. Both sides therefore have a vested interest in social responsibility: consumers feel good if they reward socially responsible companies with their custom, and can use such purchases as a form of status symbol; corporations, meanwhile, can try to generate a larger, more loyal customer base.

While some critics argue that social responsibility is "a trend that will wax and wane according to various social and economic factors" (May et al., 2007, p. 119), others believe that the emergence of social responsibility as a major business factor in the past decade is in fact a permanent change. Crane et al. note that "growing awareness of environmental issues has led many people to recognise the importance of social responsibility" (Crane et al., 2007, p. 10), and although the recent economic crisis may have led many to hold back on the spending that they would otherwise have directed towards socially responsible corporations, there still appears to be a broad consensus that social responsibility is one of the most important factors in modern business. Consequently, many companies have sought to strengthen their social policy credentials.

Environmental Policy

One of the key elements of social responsibility is the environment. For more than twenty years, there have been warnings about the effects of global warming. Many corporations choose to exhibit their social responsibility through one of a number of environmentally friendly policies:

  • Reducing the environmental cost of production & distribution.
  • Reducing the environmental cost of consumption.
  • Reducing the environmental cost of disposal.
  • Using more environmentally-friendly materials.
  • Reducing packaging and other superfluous elements of a product.
  • Instigating specific environmentally-friendly technological elements.
  • Funding research and education programs.
  • Carbon and pollution off-setting.

All of these options - and more - are regularly employed by companies that want to emphasise their environmental credentials. Large companies tend to focus on methods that require little more effort than throwing money at the problem, e.g. by funding research or off-setting their carbon emissions. However, some other companies are far more inventive, and genuinely try to reduce their environmental impact.

Social Responsibility

Aside from the environmental factors noted above, companies have found a number of ways of demonstrating their corporate social responsibility:

  • Funding education programs.
  • Providing services, e.g. transportation for school and disabled groups.
  • Promoting volunteerism among their own workers.
  • Donating money to charities.
  • Working to eliminate abuse in the chain of production.

The globalised corporate environment makes it more difficult than ever for companies to hide practices that might be unpopular in their domestic markets. For example, if a company seeks to use cheap labour in third world countries, it can make a short-term impact but will usually be exposed eventually. In other words, companies find it increasingly difficult to hide any non-socially responsible behaviour.

The Car Manufacturing Industry

The vast majority of manufacturers are global in terms of production facilities. The leading US and Japanese manufacturers, for example, tend to have dozens of factories, with at the top five companies all having at least one factory in each of North America, South America, Europe, Africa, Asia and Australasia. As such, the industry can be said to be truly global in terms of both customer reach and production. Furthermore, companies often experience great success in non-domestic markets, e.g. Japan's Toyota also sells many cars in the US, and Germany's BMW is extremely popular in the UK; the only major exceptions to this rule are two of the three big US companies, General Motors (GM) and Chrysler, both of which have been criticised for their focus on the US market.

The Impact of the Economic Crisis on the Car Manufacturing Industry

All the world's car manufacturers have in recent years suffered from the global economic downturn. In the US, the 'big three' manufacturers - Ford, Chrysler and General Motors (GM) - have all come close to bankruptcy, and GM has been forced to file for chapter 11 bankruptcy protection. Around the world, companies have suffered similar problems, although in most cases not to the extent of the major US companies. In Japan, both Honda and Toyota have suffered heavy losses and have been forced to reconsolidate their core business areas. As a result, the automobile industry has been undergoing a period of immense uncertainty, and this has led many consumers to believe that they can no longer rely on the continued presence of the big names.

Apart from the well-publicised problems for the 'big three' US companies GM, Ford and Chrysler, almost every other major car manufacturer around the world has suffered a slump in profits in the past two years, and many have incurred legacy debts during this period that will impact upon their performance for decades to come. Toyota reported a massive $1.7bn loss (Fackler, 2008) and, like most other manufacturers, was forced to re-focus activities on core revenue streams. As one of the key figures in the 'green' car revolution, Toyota had been investing heavily in environmentally-friendly cars, and had been happy to make such investments since it believe there would be massive financial benefits in the long run. However, the financial crisis crippled Toyota's ability to consider the long term implications of its current activities, and forced the company to focus on its core business. As Satoshi Hino notes, "Toyota has long been one of the more adventurous companies when it comes to placing substantial industrial bets on future changes in the automobile market, but these have always been backed by strong performances in the company's core activities" (Hino, 2005, p. 41).

The company's move into electric and hybrid cars - seen by many as a key element in the push towards greener automobiles - has largely been financed by success in core diesel machines, with the pay-off for this front-end investment expected to arrive between 2010 and 2015. However, with the core business model threatened by double-digit year-on-year sales drops, Toyota was forced in 2009 to consolidate its activities and re-focus on the most profitable elements of its production line. This decision by the company served as dramatic proof that while there was clearly a high degree of confidence in terms of the potential for socially responsible cars to provide a significant pay-off in the medium to long term, this confidence was not strong enough to allow the company to rely on such vehicles during a time of economic crisis. Clearly, therefore, market forces are not yet dictating the need for social responsibility in sufficient numbers, or with sufficient support via purchasing decisions.

Research Methodology

Research Approach

The research will take two key approaches: a questionnaire will be used to conduct primary research into consumer awareness of the question of social responsibility in the car manufacturing industry, and two case studies will be used to determine how two of the world's biggest manufacturers - GM and Toyota - deal with this issue. In order to assess the impact of the social responsibility policies of both GM and Toyota, the questionnaires will be designed to measure the impact of such policies (or the lack of them) and the degree to which they change public opinion and have the effect for which they were designed. These questionnaires will be vital in terms of bridging the gap between the theory and reality, and will expose the limitations inherent in this approach. In order to increase the likely response rate, and to comply with ethical considerations regarding privacy, the questionnaires were left anonymous and respondents were told that they could ignore any individual questions that they would prefer not to answer.

The secondary research will focus on two case studies, one looking at the leading US car manufacturer (General Motors) and the other looking at the world's leading car manufacturer, by sales (Toyota). These companies have been chosen for specific reasons. General Motors (GM) has had a difficult economic history over the past two decades, almost filing for bankruptcy in the 1990's before going on to enjoy considerable success with a series of non-environmentally friendly cars (SUV's) while professing to hold social responsibility as a key philosophical point, and then suffering a massive collapse that resulted in the company filing for the fourth largest bankruptcy in US history (see chapter 4). Toyota, meanwhile, has made a name for itself with a series of advanced hybrid cars, but has also suffered during the recent financial crisis (see chapter 5). In other words, GM is seen by many as one of the world's least socially responsible manufacturers, and Toyota is seen by many as one of the world's most socially responsible manufacturers. By comparing and contrasting their approaches and fortunes, it should be possible to develop a clear understanding of the extent to which major car manufacturers have been socially responsible in pursuing an environmentally friendly agenda.

Research Questions

The research is based on the following key questions:

  • To what extent do car manufacturing companies act with a high degree of social responsibility when designing environmentally friendly cars?
  • How important is consumer behaviour to car manufacturers' interest in social responsibility? Do consumers drive companies' behaviour, or vice versa?
  • What different approaches to the subject of environmentally friendly, socially responsible cars have been taken by different companies?
  • How has the recent economic crisis affected manufacturers' interest in social responsibility?
  • Is social responsibility progressing according to narrative trends? Is this a major change to business, or merely a passing trend?

Research Limitations

Any research project contains inherent limitations. If these limitations are ignored, they do not go away; rather, they linger and negatively impact the reliability of the overall project. Consequently, the best approach is to recognise these limitations from the start and to work to ensure that they are factored out of the equation as much as possible. As Saunders et al. note, "it's only by recognising the limitations of any research program that... the problems that always affect any research project can be brought into the open, addressed and contextualised and, in some cases, turned into positives" (Saunders et al., 2009, p. 51). The research limits of this project are as follows:

  • Social responsibility is an inherently subjective matter. Something that is socially responsible in the view of one person may be socially irresponsible in the view of another.
  • Many of the relevant subjects, such as global warming, are not universally recognised. It's therefore important to reflect the fact that there is ongoing debate.
  • There is insufficient time and space to analyse the entire market. Therefore, key examples must be selected for the case studies. As noted in 3.1, the subjects for these case studies were chosen for very specific reasons.
  • Questionnaires must be brief and simple to understand, yet they must also focus on the key points. Persuading respondents to fill in questionnaires can be difficult.

All these limitations can be overcome, to various extents. The subjectivity inherent in the research subject is in fact relevant to the continuing social, cultural and political debates regarding the extent to which car companies should, and can, adopt socially responsible roles; some critics argue that this can only be achieved if consumers adopt socially responsible approaches to their purchasing patterns, which will inevitably force corporations to adapt to face this trend. Similarly, the continuing debate over global warming - although settled in many peoples' view - continues to cause debate in many parts of the world. Finally, the limitations of time and space mean that the case study subjects must be analysed extremely closely, and the choices of company must be made carefully.

Results & Analysis

Response

200 questionnaires were sent out. The expected response rate was 40-50%, as per the suggestion by Saunders et al. that "any questionnaire-based research project that prompts between a third and a half of targets to respond can be said to have performed averagely" (Saunders et al., 2009, p. 102). In the event, 81 questionnaires were returned, representing 40.5%, which is just within the expected range. This gives a statistically relevant sample group.

Demographic Information

Demographic details are important in research concerning attitudes to consumer activity and the environment, since both of these factors can impact upon an individual's view of these issues. Question 1 concerned the age of the respondents:

How old are you?

The majority of respondents were in their teens and twenties, with a total of three quarters being under 40. This makes the questionnaire more relevant in terms of analysing the attitudes of younger people.

The second question concerned the occupation of the respondents. It was decided to provide broad categories rather than to request specific details. For one thing, this emphasised the confidentiality and privacy of the research, and for another it allowed for easy and effective categorisation of answers:

What is your occupation?

Around two thirds of the respondents were employed, self-employed or in part-time work, with the rest being students, retired or unemployed.

Awareness of Social Responsibility among Car Manufacturers

The next question asked respondents if they believed the car manufacturing industry, as a whole, to be socially responsible. A brief explanation was appended to this question, defining social responsibility as "an awareness of their impact on society, including the environment, and their efforts to ensure that this impact has a positive rather than a negative effect":

How responsible do you think car manufacturers are?

An overwhelming majority (67.9%) considered car manufacturers to be either 'not very' or 'not at all' responsible. Breaking these results down according to age and occupation gave the following results:

Appreciation of manufacturers' social awareness, broken down by age range

Clearly, levels of appreciation appear to be at least partly linked to age, with these levels peaking for individuals in their fifties. There are numerous possible reasons for this, including:

  • Media exposure: different age groups are exposed to very different media forms and sources, each of which will likely carry very different stories concerning manufacturers' levels of social awareness.
  • Learned behaviour: older respondents will have spent longer living in a time when many of the relevant issues, particularly environmental impact, were not considered.
  • Environmental awareness: some of the answers may be influenced by a lack of belief in the various arguments concerning the environment and, in particular, the car industry's contribution to global warming.

Clearly, therefore, awareness of social responsibility is a dynamic factor that reflects a number of different viewpoints, and this factors is by no means viewed the same by different age groups. The clear correlation between age and awareness indicates that manufacturers must ensure that they operate multiple simultaneous social responsibility programs if they are to reach all these groups. However, the next question sought to determine whether or not it was strictly necessary for the manufacturers to try to appeal to everyone, and asked how important social responsibility is to purchasing decisions. First, in terms of the overall response, the result was as follows:

How important is a manufacturer's social responsibility for you when choosing what car to buy?

Almost half (48.1%) claimed that social responsibility was either 'very' or 'quite' important, with just over half (51.9%) claiming that it was 'not very' or 'not at all' important. Given the relatively small sample group for this research project, the difference is small enough to be statistically irrelevant, and broadly indicates a 50-50 split in terms of opinion on this subject. However, looking at the results in terms of an age-related breakdown results in a very different set of results:

Importance of social responsibility of manufacturers, by age

The data shows a clear depreciation of the importance of social responsibility for older consumers, although there is evidence of an increase for consumers in their 50's and above. In order to determine a link between awareness of social responsibility in the industry and the importance of social responsibility in purchasing decisions, the results from figures 4 and 6 were then combined:

Importance, and awareness, of social responsibility in the car manufacturing industry

There is clearly an inverse relationship between awareness of social responsibility as a factor in the industry, and belief in the importance of social responsibility. For example, younger people are most likely to believe that social responsibility is an important factor when making purchasing decisions, but are the least appreciative of any efforts that have so far been made. To an extent, this can be seen to be a matter of perception, but there's also clearly a problem for the industry in terms of persuading parts of the consumer base that its intentions are genuine. In order to measure the degree to which various manufacturers have succeeded in their aim of seeming more socially responsible, respondents were next asked whether they thought the industry had become more socially responsible over the past decade:

Do you think the car industry has become more socially responsible over the past decade, less socially responsible, or it has stayed mostly the same?

The vast majority of respondents believe there has been no real change, strongly suggesting that either the message from the manufacturers' has not got through to the public, or that there is a deep level of cynicism in terms of whether the public believe that the rhetoric has translated into genuine action.

Finally, respondents were given a range of options and were asked to indicate which they believed were most important in terms of social responsibility. They were asked to tick 'two or three' options, with the aim being to allow them to indicate the elements of corporate social responsibility that were deemed most important:

Most important elements of social responsibility

Clearly, the vast majority of consumers overwhelmingly equate social responsibility with environmental issues. The only other factor to come close to this in terms of relevance was making donations to charitable causes, which to an extent also involves the environment. Social responsibility is not purely about the environment, and encompasses a range of other activities that can improve society. However, for the consumers canvassed for this research project, environmental issues were by far the most important, and it's therefore possible to argue that the environment has overtaken all other elements of social responsibility and has become the single most important issue. Although manufacturers could fight against this perception and attempt to focus attention on other factors, the best approach might be to accept that when it comes to social responsibility, most consumers overwhelmingly focus on the environment.

Case Study 1: General Motors (US)

Background

General Motors (GM) is the largest US car manufacturer, and the second largest in the world (after Toyota) (Trott, 2009). The company relies heavily on four key brands: Chevrolet, Cadillac, Buick and GMC. Each of these brands has a distinctive presence in the US market, but critics have argued that GM has lacked focus on the non-US markets, leaving it particularly vulnerable to domestic turmoil and economic volatility. In 1994, GM came close to bankruptcy following a $4.5bn loss, but cost-cutting measures and management changes ensured its survival. The company was one of the key instigators of the huge rise in sales for sports utility vehicles (SUV's) in the 1990's, a trend that was highly lucrative for GM but which resulted in criticism from environmental campaigners. Between 1998 and 2001, GM and Ford vied for the top spot in the US market, primarily through massively increasing sales in the SUV market. However, the downturn which followed the September 11th 2001 attacks saw GM suffer particularly hard, even compared to Ford, with the latter at least having a strong European heartland on which to rely during difficult trading conditions in the US. Nevertheless, GM bounced back and by 2005 was recording strong sales figures and was eyeing major expansion into overseas markets.

However, the recent economic crisis virtually crippled GM, as well as its two key domestic rivals, Ford and Chrysler. GM lost $38.7bn in the 2007 fiscal year (Wearden, 2009), and an almost 50% drop in sales. The following year, GM predicted that it would run out of money in mid-2009 without a substantial re-financing program, and called for government help. In November 2008, the company joined with Ford and Chrysler in formally requesting help from the US government in order to stave off bankruptcy. Even in the context of the financial crisis, this move was massive, since it represented the genuine possibility of the US's three major car companies going bust almost simultaneously. Although the US government, under outgoing president George W. Bush, was initially reluctant to provide money at a time when many other businesses also had legitimate claims for government help, in December 2008 a bridging loan was finally offered. Despite numerous attempts to cut costs and reorganise the company over the next six months, in June 2009 GM filed for chapter 11 bankruptcy protection. After Lehman Brothers, Worldcom and Washington Mutual, this was the fourth largest bankruptcy filing in US history. Eventually, on July 10th 2009, the US government helped to finance a new company, NGMCO Inc., that took on the majority of the old GM assets. The old GM changed its name to Motors Liquidation Company, and the new Vehicle Acquisition Holdings company changed its name to General Motors Company, thereby bringing GM back to life. The new version of GM is mostly owned by the US government, while the old GM - Motors Liquidation Company - continues to go through the process of the bankruptcy filing.

Social Responsibility

Both the old and the new GM have been involved in programs to emphasise their social responsibility. Since 1996, GM has financed the Safe Kids USA 'Buckle Up' program, designed to encourage children to use seatbelts. The company has also contributed to a consortium that has donated over $1.2bn to fund education for engineering graduates, a scheme that has recently been extended worldwide. GM has also donated more than $200m in the past decade to charitable causes, and has supported both Democratic and Republican presidential candidates - often simultaneously. The company's more recent philanthropic activities include a new global aid program (GM, 2009) and a number of smaller, local community projects designed to improve provisions - mostly for children - in areas surrounding the company's main factories. These projects have, for the most part, been maintained despite the continued financial uncertainty and the chapter 11 bankruptcy proceedings that took place in mid-2009.

GM has also launched a major program called 'I Am GM', designed to showcase the company's strong workplace diversity policies. The program involves placing adverts in newspapers and magazines, and on television, in which GM employees from different ethnic backgrounds talk about their pride in the company. As well as reinforcing the idea of GM as an equal opportunities, ethnically diverse employer, the campaign is designed to show how GM works towards engineering a higher degree of diversity in society. Linked to this program is the company's renewed focus on safety, which has seen not only improvements designed to help children in the event of an accident, but also high-profile campaigns to reinforce the company's vehicles in order to make them withstand bigger crashes. The 'Buckle Up' program has been maintained, and GM has expanded this campaign since 2008 by taking the message to schools around the US. The company claims that "corporate responsibility is about more than just words - it's an acknowledgement that our actions shape our reputation" (GM, 2009).

Environmentally-Friendly Technology

During the 1990's, a number of scandals saw the company accused of poor environmental management, including an accusation that sediments have been stored in unsafe conditions. In 2006, GM was one of a number of manufacturers from around the world named in a suit brought by the State of California over the issue of pollution. The case was dismissed a year later, but the damage to GM's reputation had already been done. In 2008, the Political Economy Research Institute (PERI) ranked GM 18th on its list of the US's worst polluters, giving the company a toxic score of 73,248, set against the no. 1 polluter, E.I. du Pont de Nemours, which scored 285,661 (PERI, 2008). Meanwhile, in the same year, the Union of Concerned Scientists (UCS) ranked GM 7th out of the world's largest car manufacturers in terms of pollution and environmental performance, noting that although some of the company's brands performed well in this area, many others performed very badly (USC, 2008). As a result of this negative publicity, by the end of 2008 GM was seen to be lagging behind other companies in terms of (a) establishing its green credentials, and (b) getting these credentials across to the public.

In fact, GM has a better record on environmental issues than might seem the case given the poor ratings mentioned above. Back in the early 1990's, GM produced the first all-electric US car, the EV1; although this was not a huge success, and was ultimately discontinued within ten years, the EV1 still popularised the idea of electric cars in the US and showed other manufacturers that the concept had potential. GM has long been working on alternative-technology vehicles, pioneering the use of turbochargers and ethanol-burning flexible-fuel vehicles. In 2004, GM was the first US company to introduce alternative fuel systems for SUV's and pick-up trucks, and the company has since launched a number of mild (i.e. part electric, part diesel) hybrid cars, such as the Saturn Vue and Chevrolet Malibu. Although these cars were introduced alongside, rather than instead of, conventional diesel cars, many industry analysts argue that GM has worked hard to create environmentally-friendly cars but has for the most part failed to promote this aspect of its business. GM has also worked on hybrid vehicles that have been mostly ignored by other companies, including a hybrid Magic-branded bus due for introduction between 2012 and 2014. GM has also worked hard on improving electric car batteries and instigating hydrogen technology. The company is pioneering flexible fuel technology, and all four of its core brands now have some form of flexible fuel model available.

Criticisms of GM's Social Responsibility

As the largest US car manufacturer, GM has naturally come in for heavy criticism for pioneering the modern phenomenon of the SUV. An SUV is a large, very strong car designed for carrying heavy equipment and negotiating difficult terrain; however, these vehicles have become extremely popular in suburban America, where they have routinely been used for common urban journeys. Since SUV's have very poor fuel efficiency, some critics have argued that SUV's, their owners, and their manufacturers - including GM - are contributing to the global warming problem. GM has recognised that global warming is a genuine phenomenon, and has made a number of clear public pronouncements on the subject. However, the SUV was one of the key vehicles in GM's recovery from near-bankruptcy in the mid-1990's, and the recent economic crisis has seen the SUV confirmed as one of GM's core products. Attempts to create hybrid SUV's have met with mixed results, and it's notable that while some other companies have found success with smaller, lighted hybrid cars, GM's attempts to create hybrid SUV's have for the most part failed.

As of the end of 2009, GM has sold less than 1,000 hybrid vehicles (GM, 2009). This compares with companies such as Toyota (see chapter 5), who have sold more than 1m around the world. Clearly, GM's attempts to create an environmentally friendly and socially responsible vehicle have been somewhat stymied by an inability to capitalise on apparent public interest. Most US users of hybrid vehicles buy imported Toyota machines, with the Japanese manufacturer having captured around 75% of the American market (Toyota, 2009b). When the US government was forced to help GM (and other US car manufacturers) with its recent stimulus package, it was apparent that there was disappointment in some quarters concerning the lack of an emphasis on the need to promote environmentally-friendly vehicles. However, this lack of emphasis arguably reflects the fact that there isn't enough of a market for GM to justify the kind of investment that the hybrid sector requires. Consequently, GM - like Ford and Chrysler, the other two barely surviving US car giants - has focused on its core brands and products, and for now this means little attention to environmentally friendly vehicles.

Case Study 2: Toyota (Japan)

Background

Toyota is the world's largest car manufacturer by sales (Isidore, 2009), with annual revenue in 2009 standing at $263.42bn - down 21.9% on the previous year's figures (Toyota, 2009). The company has a massive worldwide presence, with factories in over 30 countries including the US, the UK, France, Brazil, Portugal, Russia, India and Japan. Since the late 1990's, Toyota has been the most prominent exponent of hybrid technology and environmentally-friendly options such as electric cars. Ranges such as the Toyota Prius have become recognised as symbols of a new generation of car manufacturing in which the environmental and social impact of vehicles is a key consideration. Although sales of these hybrid vehicles have not, as yet, surpassed sales of Toyota's traditional diesel-engined cars, the company is at the forefront of the environmentally-friendly, socially responsible market and as such expects to capitalise massively when the market for such vehicles reaches maturity.

However, Toyota - like most other car manufacturers - has experienced difficult financial times in recent years. With revenue down and the company reporting its first net loss in more than seventy years, 2008 was a traumatic years for a company that traditionally prides itself on stability and reliability. Like its domestic rival Honda, and many of its international rivals, Toyota had to ask for government loans in order to remain competitive; however, while many other companies needed these loans in order to survive, Toyota requested loans simply because it wanted to ensure it remained competitive in an environment in which it felt that many of its competitors would be artificially boosted by government cash. The company cut back many ancillary programs, including a number of factories, a chain of dealerships, and the costly Formula One racing team, and re-focused on core products. Just as recovery seemed to be around the corner, a major safety recall was necessitated in late 2009 and early 2010 as the company discovered problems with braking software on a number of models. The estimated cost of this recall program is between $1.8bn and $2bn (Fisk, 2010), which represents a sizeable chunk of the company's profits for the next few years.

Social Responsibility

In 2001, Toyota began to promote 'the Toyota way', a socially responsible philosophy that emphasised two key areas: respect for people, and continuous development. Aligning technological advances with the need to improve lives, Toyota sought to counter the idea that technology is essentially de-humanising. The Toyota Way has four main components:

  • Group problem-solving, recognising the ability of individuals to express themselves.
  • Long-term thinking, including an awareness of the company's environmental impact.
  • Developing employees, improving their skill sets so that they contribute more to the company.
  • Solving root problems, rather than covering up the symptoms of those problems (Liker, 2004).

The Toyota Way quickly came to be seen by many analysts as the benchmark for early twenty-first century social responsibility. Many observers began to position the Toyota Way as "less about Toyota, and more about how the world's major corporations can retain their cutting-edge competitiveness while acting in a more socially responsible manner" (Liker, 2004, p. 205). As a result, many other companies around the world began to expressly or implicitly define their own corporate social responsibility programs within the parameters of the Toyota Way. The result, for Toyota, was substantial positive publicity about the company's leading role in fundamentally changing the way in which corporations approach their relationship with their customers. By 2004, the Toyota Way had been championed by over 100 leading companies around the world (Liker, 2004, p. 206) and was widely seen to have made a substantial and genuine contribution to corporate social responsibility, including establishing the idea of such responsibility in the first place. Despite some criticisms of the plan, including "an emphasis on words over actions" (Crane et al., 2007, p. 56), the Toyota Plan positioned Toyota as one of the most socially responsible corporations in the world today.

In 2006, Toyota established the Toyota Corporate Citizenship Division (CCD) in a bid to further formalise its commitment to social responsibility and sustainable development. CCD was based on Toyota's claim that it was determined to "reinforce social contribution activities and integrate corporate social contribution functions that had (previously) been performed by multiple divisions" (Toyota, 2006). The CCD program was not specifically a new initiative, but rather an umbrella venture designed to bring the company's various environmental, educational and traffic safety programs together. However, one key aspect of the CCD launch was Toyota's formal acceptance of the global warming phenomenon, and of the car manufacturing industry's role in accelerating global warming and thereby threatening the environment. Among the CCD initiatives designed to improve Toyota's contribution to the environment were:

  • A reforestation program, providing funding for reforestation schemes around the world, including Japan, North and South American, and Europe.
  • An educational program, designed to help school-children learn about the need to protect the environment.
  • Research funding, providing money for research into reforestation and other methods of combating the effects of global warming.

CCD also expressly committed Toyota to a series of regional Harmonious Society programs, designed to promote philanthropy, welfare and self-reliance within local communities, and to demonstrate ways in which these communities can help themselves, and less fortunate members of society, to improve their local environment. Volunteer activism was promoted as part of this scheme, with Toyota employees in Japan encouraged to spend time working with charities and other organisations. CCD also enabled the construction of a Toyota museum in Tokyo, with the aim of educating people about not only the history of the company, but also about the key principles of CCD. Many analysts broadly welcomed CCD as an affirmation of Toyota's social responsibility, and the company remains one of the firmest backers of the need to educate children about the dangers of climate control. Toyota's funding of research has also enabled significant work to be undertaken regarding experimental reforestation techniques, as well as work on new fuel and automotive technology. Although the benefits of this research have yet to be seen in the real world, this is largely due to the necessarily long periods of testing, and the company confidently predicts real world application to be manifested by 2015 for a number of projects.

Environmentally-Friendly Technology

As well as focusing on social responsibility through its CCD program, Toyota has also been arguably the most active proponent of environmentally friendly cars. The company has noted that these vehicles can not only cut down on pollution, but can also improve local communities by running more efficiently and with less noise. As part of its drive to improve its environmental standing, Toyota initiated the Hybrid Synergy Drive (HSD) project in the early 1990's, with the aim of developing a cohesive set of hybrid car technologies which allow Toyota's Prius, Hybrid and Lexus ranges to operate as full hybrids (i.e. fully powered by electric batteries) rather than mild (partial) hybrids. HSD has been extremely successful since its launch, and in 2009 the company announced that it had sold more than 2m hybrid cars, resulting in a cumulative estimated reduction in CO2 emissions of around 11m cubic tonnes (Toyota, 2009b). HSD has allowed Toyota to corner 75% of the US market in hybrid cars, 63% of the European market, and 61% of the Japanese market (Toyota, 2009). The system has been so successful that Toyota has announced plans to introduce HSD on all its models from around 2015-2019. Concomitant with this success has been work, jointly undertaken with Honda, to reduce the costs of hybrids, and this too has been successful: between 2005 and 2009, the incremental costs of hybrid vehicles was reduced by 50% (Toyota, 2009b). As a result, Toyota is now widely seen around the world as one of the most dynamic and experimental - but also successful - manufacturers of hybrid cars.

The recent economic crisis has somewhat dented Toyota's previous enthusiasm for hybrid technology, although the company remains committed to the concept in the long-term. Prior to the onset of the 2007 economic crisis, it was widely noted that although Toyota had made major improvements in terms of both the technology and affordability of the hybrid program, there was still a great deal of work to be done, and this would require continued high levels of investment. However, the economic crisis has removed much of the company's financial stability, and this has resulted in a reappraisal of Toyota's ability to fund the kind of aggressive investment that is widely accepted as necessary in order to bring HSD technology to a much wider range of everyday cars. Toyota has admitted that funding for some projects has been put on hold, but remains committed to continuing investment with its core Prius, Lexus and Hybrid ranges (Toyota, 2009b). The company's public identity is so closely linked with environmentally friendly cars, that Toyota faces two conflicting elements of the debate over its continued investment in this area during troubled economic times: on the one hand, investing in this technology is one of Toyota's unique selling points (USP's) and arguably helps it maintain a high profile even among users who are not (for whatever reason) likely to purchase a hybrid vehicle in the near future; on the other hand, this public image is so well established that the company could likely afford to rein in its spending in this area and concentrate on promoting its existing technologies, and this would probably be enough to maintain the public image of Toyota as an environmentally friendly, socially responsible car manufacturer.

Criticisms of Toyota's Social Responsibility

Toyota has been roundly praised by many analysts, who argue that the company's environmental and social responsibility programs have been strong, effective and genuine. However, these programs have not been without their critics. William B. Werther and David Chandler suggest that "much of Toyota's press commentary on the issue of social responsibility has focused on recycling the same initiatives repeatedly, rather than developing new policies" (Werther & Chandler, 2006, p. 88). The company has proved remarkably adept when it comes to repackaging old news, and this old news is in many cases more effective than the new news of rival manufacturers, but it's still possible to argue that Toyota has not really moved on with its social responsibility programs since the early 2000's. Furthermore, some of its aims - such as educating children about the dangers of global warming - are laudable rhetoric but have not been transformed into realisable achievements to the degree that the rhetoric might have proposed. Werther and Chandler go on to note that "Toyota has benefited from the relative lack of action of its contemporaries" (Werther & Chandler, 2006, p. 90), which has allowed the company to make small moves towards social responsibility and environmental concern and have those moves come across as far more powerful and bold, in relation to companies such as Honda and GM etc., than they would seem if judged purely on their own merits. Nevertheless, this criticism has for the most part been drowned out by a chorus of approval, and it's notable that the company's reputation for social responsibility - no matter how carefully orchestrated - has been received by the public, for the most part, as a genuine phenomenon.

Conclusion

Car manufacturers are business entities and, as such, are committed to pursuing profit. Although it's certainly not impossible for such companies to pursue operational goals with socially responsible objectives, these will inevitably have to be couched within the terms of a profit motive, and the structure of such large companies - with a board of directors reporting to shareholders - makes it virtually impossible for them to abandon the profit motive in favour of a wholly socially responsible approach. Although some world governments have shown a degree of sympathy for the idea that socially responsible corporate behaviour (particularly in the heavily-polluting car industry) should be rewarded by beneficial tax and trading incentives, it remains clear that for the most part it is necessary for such changes to be market-driven. A market-driven change will therefore reflect consumer desire to make purchases that reward social responsibility, and there is a perception that this will necessarily result in higher costs. As has been shown, it's certainly clear that the cost reductions achieved in the car manufacturing industry over the past three decades are mostly inconsistent with environmentally and socially responsible cars. However, while some consumers have always shown a degree of willingness to pay more for a certain type of car than might strictly be necessary, this type of behaviour has almost exclusively been couched in terms of the desire to own a car that functions as a status symbol. Consequently, socially responsible car manufacturers must position their products in a similar manner. While this is certainly one of the potentially profitable opportunities available to car manufacturers, however, it's clear that many manufacturers do not see it as sufficiently strong to support an entire company. In other words, the market has not yet pushed manufacturers towards full social responsibility.

The research carried out for this project clearly shows that the environment is by far the most important factor in most people's thoughts about social responsibility. This presents the industry with a problem, since cars are inherently environmentally unfriendly and even hybrid technology requires production plants etc., i.e. things that produce pollution. Even the most ardent supporters of environmentally-friendly vehicles would not go so far as to suggest that the industry can be made entirely compliant in terms of the environment. The best case scenario for the car manufacturing industry is to work to reduce the direct impact of motoring (i.e. the impact of the actual vehicles through carbon emissions etc.) and to hope that consumers will be more tolerant of less visible factors such as the carbon emissions from factories and production plants as well as subsidiary activities such as research and design. Whether this approach will be successful is unclear, but consumers are unlikely to want to give up their dependence on cars, so some form of subconscious compromise is likely to be achievable. It's likely that consumers will adopt relative views of the industry, i.e. viewing certain manufacturers are being more socially responsible than their competitors. As the research shows, younger consumers are more likely to be influenced by this, so there is a real benefit for companies such as Toyota who can demonstrate their environmental credentials. It remains to be seen whether younger, environmentally-aware consumers carry this awareness through to their purchasing decisions in later life, or whether their attitudes change as they get older. However, whatever the permutations, it's clear that manufacturers can't afford to ignore the issue of social responsibility, and that they must focus in particular on the environment.

It's clear that the market still favours safe options, and that socially responsible products are for the most part seen as a luxury. In fact, social responsibility can be seen as the ultimate luxury in the modern market. As Philip Kotler and Nancy Lee note, "decadence and overt luxury have become unfashionable in recent years, as part of a backlash against excess, so social responsibility - and socially responsible brands - are now one of the key means by which those with disposable income can flaunt their wealth without inviting criticism" (Kotler & Lee, 2005, p. 80). According to this theory, someone driving a Toyota Prius hybrid car, for example, is essentially doing so (at least in part) for the same reasons that someone might drive a top-of-the-range Ferrari: both cars are a form of status symbol. However, while the Ferrari might draw accusations of flashiness and showmanship, the Prius is seen as a sign of environmental concern and social responsibility. The Prius therefore confers a degree of social responsibility upon its owner. Furthermore, Kotler and Lee argue that "in the west, we are increasingly aware of global inequality, yet we do not want to give away our wealth" (Kotler & Lee, 2005, p. 82). In other words, driving a socially responsible car is a way of spending money, and displaying wealth, while buttressing the act of spending against criticism by emphasising the socially responsible aspect of the product. This means that the public appetite for socially responsible cars is fundamentally based on a desire to display wealth and status; it's therefore no surprise if poor economic conditions limit the degree to which such status symbols can be afforded, and companies such as Toyota are therefore unable to rely on these ranges to generate huge profits.

The development of environmentally friendly cars can therefore be seen as a function less of social responsibility on the part of car manufacturers, and more as a function of social responsibility (for various reasons, as outlined above) on the part of consumers. Car manufacturers will always react to consumer demand and consumer opinion, and the recent relative success of socially responsible cars can be seen as an example of companies attempting to gain an early foothold in a potentially extremely lucrative market. Companies such as Toyota did not, therefore, decide to focus so much money and time on products such as the Prius simply because their executives felt social responsibility was a morally or ethically correct approach, although well-planned and well-executed advertising campaigns may well have given this impression. Instead, Toyota - a company with a history of spotting opportunities early and moving into growing markets (Hino, 2005, p. 6) - sought to become the dominant figure in a market that it believed would grow massively over the next decade. The economic crisis has limited such optimism, and Toyota (and other manufacturers) have cut back on this area accordingly. However, it would seem that there is, overall, a high degree of optimism concerning the long-term future of socially responsible cars, and most car manufacturers believe that this is an area that will eventually prove highly lucrative. The fact that such an approach is not, however, a part of core business strategies, was evident in the various financial stimulus plans put forward by world governments in recent years, many of which failed to provide the level of support for socially responsible cars as campaigners would have wanted. Nevertheless, many analysts believe that the market is still moving towards rewarding social responsibility on a larger scale, and even if this process has been dramatically slowed by the economic crisis, many expect it to ultimately resume when the financial basis is in place. Consequently, although the motives for socially responsible behaviour can be questioned, it's clear that there is still a place for social responsibility in the car manufacturing industry, and this is likely to lead to major developments and investment programs once the immediate effects of the financial crisis have been overcome.

Recommendations

Based on the research carried out, the following recommendations can be made:

  • Manufacturers should not abandon socially responsible and environmentally friendly vehicles simply because of the short term problems associated with the economic crisis.
  • Consumers should be more prepared to back their interest in social responsibility with relevant purchasing decisions.
  • The car manufacturing industry should make concerted, united efforts to introduce certain standards in terms of environmentally friendly, socially responsible technology.

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