Tan Hiep Phat. Prepared by the Kenan Institute Asia November 2010

Transcription

1 Tan Hiep Phat Prepared by the Kenan Institute Asia November 2010

2 Case learning objectives While most companies recognize the importance of adopting CSR, there is a wide spectrum of CSR activities, ranging from charity to fully integrated strategic programming. The Tan Hiep Phat Trade & Service Co. Ltd (THP) case study exemplifies a company moving along this spectrum, and requires students to evaluate the next best steps for CSR growth. While the company has been lauded in Vietnam for its high quality products and compliance with important international standards, it has also been criticized for environmental degradation. By reading this case and completing the exercises, students will have a better understanding of: Benefits of continually investing in technology and infrastructure The challenges of moving along the CSR spectrum Evaluating if community engagement initiatives are truly strategic How companies devoted to CSR can still come under criticism Co-authors Christine Davis, Senior Associate, Kenan Institute Asia David Lehr, Adjunct Professor, UNC Kenan-Flagler Business School for the Center for Sustainable Enterprise Research, editing, production and translation team Richard Bernhard, Stephanie Soderborg, Kamonphorn Kanchana and Pham Lam Thuy Quynh This case study was developed under the Global Compact Network Vietnam (GCNV). The Vietnamese Chamber of Commerce and Industry (VCCI) is the national implementing partner of GCNV with financial support provided by the United Nations Development Programme (UNDP). Kenan Institute Asia was selected as the project consultant for the Embedding Corporate Social Responsibility in the Vietnam through Research, Training and Curriculum Development Component.

3 Tan Hiep Phat 1 Tan Hiep Phat Beverage Group Corporate social responsibility (CSR) is increasingly integrated into the core culture of major companies. Well-known firms from Chevron to Microsoft to IKEA have made a public commitment to CSR and regularly report on their performance. More and more suppliers are being held to worldwide Codes of Conduct that specify standards on everything from environmental and resource management to labor and human rights issues in order to gain access to global markets. Some European and other governments even require companies to report on their social and environmental performance. Despite the increasing interest in, and adoption of CSR, companies engaged in CSR follow a broad range of strategies in crafting their approach. At one end of the spectrum is a focus on charity and philanthropy; on the other a fully integrated program that pervades every aspect of the business. Rarely does a firm go from one extreme to the next; instead their strategy typically evolves, often driven by basic compliance with laws and regulations or international standards, and becomes more sophisticated over time. As with all business activities, there are costs and benefits of CSR and companies pay close attention to these. Tan Hiep Phat Trade & Service Co. Ltd. (THP) is one of the three leading beverage manufacturers in Vietnam and a firm that has invested heavily in their manufacturing and data management processes. They are also the first company in Vietnam to achievee three important standard certifications: ISO 9001:2000 (quality management), ISO (environmental management) and HACCP (food safety). However, THP has also been in the news for less popular reasons, incurring a fine of VND42.5 million in mid-2009 for not treating wastewater properly before discharging it. 1 THP has recently, and unequivocally, stated their desire to become a world class company. Though they already have several CSR efforts in place, their management is committed to developing and implementing an integrated CSR strategy throughout the firm. The Tan Hiep Phat case is about a company moving along the CSR spectrum; evolving from a firm with some CSR components led by their public relations and marketing teams to a company that wants to wholeheartedly embrace CSR in every aspect of their business. The desire is there, but how to go about this is just beginning to be examined. This is a transition time; we are in a period of assessing and aligning business processes to ensure sustainability for the future we want to be a world class company, declared Tran Ngoc Bich, THP Deputy CFO 2. 1 Thanh Nien News [Vietnam] 18 Aug 2009, 2 Interview at Tran Ngoc Bich, Deputy CFO, THP headquarters on November 23, humanrights.org/categories/individualcompanies/t/tanhiepphat 2010.

4 2 Tan Hiep Phat Tan Hiep Phat Beverage Group Tan Hiep Phat & Service Co. Ltd. (THP) was established in 1994 and has become one of the three leading beverage manufacturers in Vietnam. Founded by Dr. Tran Quy Thanh, its first product was Ben Thanh Beer. In 2001 THP diversified into non-alcoholic drinks with its Number 1 line of energy drinks. In the past nine years, THP has continued to expand its product lines to include a large variety of packaged and bottled drinks, packaged foods, and product packaging. Founder Dr. Thanh is known as a strong leader who promotes breakthrough thinking. He is an out of the box thinker who prioritizes staff development, training and capacity building, and prioritizes the importance of team spirit. Consumers may not know the Tan Hiep Phat name, but they will know its products: Number 1 tonic water, Zero degree drinks and teas, Juicie drinks, and Dr. Thanh s Herbal Tea. THP became the first company selling bottled tea in 2006, after investing US $20 million in production equipment and launching the Zero Degree brand. Last year, the sales of THP bottled tea increased by 30-40% according to Maximark, a chain of supermarkets. 3 In 2008, THP moved to a vertical integration model to alleviate production hold-ups due to insufficient packaging. THP created Pacific Packaging to enable their own in house production of product packaging for their production needs. Pacific Packaging manufactures PET preformed bottles, plastic caps, carton boxes, shrink wrap, polyethylene wrap, and printing. Investing in international standard technology and infrastructure, THP regularly launches new products, both nationally and for export saw the successful introduction of herbal products with the Dr. Thanh line of healthier herbal beverages, and VIP Café, a coffee milk drink made from 100% premium Buon Ma Thuot coffee. THP group is also the first company in Vietnam to achieve three important standard certifications: ISO 9001:2000 (quality management), ISO (environmental management) and HACCP (food safety), and in June 2010, its beverages were selected to be one of the Vietnam Value products, a selection of Vietnamese products that are manufactured in Vietnam and symbolize Vietnam business success. THP employs more than 3,250 employees, and invests in foreign expertise at the senior and executive management levels. 3 Vietnam Beverage Market Update, February 8, 2010,

5 Tan Hiep Phat 3 THP believes their clarity of vision, mission, and core values provides them the leadership advantage, employee energy, and creative thinking needed to charge ahead into a demanding marketplace and take a competitive advantage. The Tan Hiep Phat s vision, mission and values follow: Vision To become a leading corporation in Asia with three main businesses: Beverages, Food, and Packaging. Mission THP Group manufactures and markets products that will improve the health of Asian families and individuals with suitable taste and world class quality products, and continuously provides superior customer satisfaction to be recognised as the preferred supplier / partner to do business or work with. THP Core Values Today is better than yesterday but not tomorrow. Continuous improvement. Can-do mindset. Greatest family-oriented spirit. Treat each other with love and respect. Committed to world-class quality. Reliable partner. Win-win spirit. I Own business concept. Responsible and honorable corporate citizen.

6 4 Tan Hiep Phat It builds on these leadership tenets with what it identifies as six core operational strengths: 1. Distribution almost 200,000 outlets selling THB products 2. Branding recognizable products which consumers believe to be top quality 3. Human resources a focus on employees, with fair labor practices, safe working environment, employee involvement programs, and a competency-drive code of conduct 4. Partnerships for business and CSR 5. R&D investment in world class systems and experts 6. IT systems investment in SAP across all businesses of the THP group was implemented in April 2010, including the company s beverage manufacturing and packaging plants, allowing THP to operate more efficiently as an integrated unit 4 Healthy beverages vs. a history of beer THP began as a brewery, and it still markets Ben Thanh and beer brands. However, it is repositioning itself as a healthy beverage company, given consumer demand for healthy drinks. The company has increasingly focused on natural and herbal beverages over the past several years, most notably with its Dr. Thanh brand of herbal beverages. THP s CSR Programming Since its founding, THP has facilitated or participated in numerous social activities, led by their motto Profit is not the sole purpose. Founder Dr. Thanh states on the THP website that I think that the development of an enterprise is always related to that of the community so that [THP] is closely connected with social activities is a necessity THP Group has always been the first pioneer to be sympathetic with 4 THP presentation, November 23, 2010

7 Tan Hiep Phat 5 and responsible for the community and consider our participation in social and charitable activities as part of our responsibility. 5 While the company does believe that providing jobs is our primary contribution to Vietnamese society, 6 they do have wide-ranging CSR focus areas, and are considering how to best manage CSR for the future. THP does not have a dedicated CSR team; rather, responsibilities and coordination for its social responsibility programming and activities is managed by the Marketing and Public Relations teams. THP s CSR programming can be separated into good governance, human resources, community engagement, and environment as follows: 1. Good governance THP benchmarks other best in business corporate governance processes to build transparent processes. They cite adherence to standards at the level required by the Sarbanes-Oxley Act. THP believes this is a key for sustainable growth. Training for risk management and transparency is provided for management. 2. Human resources THP has a documented integrity policy which all employees must sign that outlines codes of conduct and company expectations for honesty and authenticity. Benchmarking Australian codes of conduct, they drafted their own competency-driven code which directly links back to the company s core values. There is a large focus on training and development of employees, including sourcing of soft skills and leadership training programs from world class external consultancies. Retaining talent is a priority. Retention programs include the Young Professional Program, and an 18 month externally outsourced coaching program which extends to middle management as well as senior management in leadership coaching. The company just conducted an Employee Survey to identify areas of opportunity and concern; results will be used to drive planning moving forward. This is the first such survey the company has carried out to understand more specifically what employees are thinking. New ideas under consideration, for example, include allowing flexible working hours, something quite new for Vietnamese companies. This means continuous examination of existing processes of all kinds, and taking on board the voices of customers and employees alike to identify areas for improvement. 3. Community engagement Focusing primarily on education, THP provides financial support for scholarships. An initiative coined Dr. Thanh unites with poor students will be implemented over a 10 year period, from 2010 to 2020, launched with a budget of VND 600 million in the first Social Activities 6 Interviews with Tran Ngoc Bich, Deputy CFO, and Annie Charasvirojna, Corporate Service Director, November 23, 2010

8 6 Tan Hiep Phat year alone. Recipients are underprivileged students who come from families struggling to make ends meet, which often puts the child s education at risk. The company is in the process of setting up a separate foundation which will focus on these scholarships and education related support. A portion of company profits will be used to fund and maintain the foundation; THP is awaiting government approval. In a new pilot project, the company has made a commitment to support education costs for 200 underprivileged children over the next 10 years in Thanh Hoa province. The pledged amount of VND 250,000 per child per month will allow these children to stay in school. Dr. Thanh said, We chose Thanh Hoa for the pilot because it is one of the poorest parts of Vietnam, with many poor students who face difficulties in achieving academic excellence because of their limited access to school. He added that once the pilot project has been successfully implemented in Thanh Hoa province, the company will expand it to other provinces in the country. 7 In addition, the company supports sports and healthy lifestyle programs in schools. THP sponsors sports activities throughout the country such as National Football V League, Cycling HTV Cup, and the International Number 1 Football Cup. 8 THP believes in supporting sporting activities to promote healthy lifestyles and support the government s national goal to prevent diabetes. These efforts also support THP s new focus on health and wellness. In 2009 THP coordinated with the Vietnam Red Cross to organize the "Power Humanitarian " charity, an aid program which provided assistance to Storm 11 flood victims in Phu Yen province, as well as ongoing support to Agent Orange victims and others in need of food and shelter. 9 That assistance also extends to disaster relief for families impacted by floods in central Vietnam. THP has rebuilt houses, roads, and coordinated with other partners and the Vietnamese military to provide food gifts for needy families. THP employees get involved, helping to deliver the food baskets. THP has been recognized for its community commitment. Ms. Nguyen Van Hung - Vice Chairman and Permanent Secretary General VBA, and Editor of Beverage Magazine Vietnam, presented a trophy to THP s Tran Uyen Phuong, Director of Group Communications at a ceremony held last August 2010 where the scholarships were presented to the students. Ms. Hung noted that THP contributes several billion dong every year to charitable causes, and sponsors a number of community-based programs which provide direct assistance to the poor ng.htm Ibid.

9 Tan Hiep Phat 7 4. Environment Energy efficiency and water stewardship are two areas of focus. Solar energy panels are being installed at the new factory campus mentioned above. These panels will be used to help power the new plant. THP recycles the water it uses and encourages wise consumption, with water is breath posters mounted on walls and doors. In addition, the company uses green products and natural ingredients wherever possible. For example, they do not use chemical fragrances in their products. The production process is very strictly controlled with only natural ingredients and fresh raw tea. They do not use preservatives. A factory incident THP made headlines in Spring 2009 when toxic wastewater and other pollution from a Tan Hiep Phat beverage factory contaminated communities in Vinh Phu Commune in Thuan An District. Local residents said the canal running through their neighborhoods turned black in two years since the factory opened. They complained, and said they used to use water from their neighborhood canal for their daily needs which they could no longer do. Polluted water from the canal also spoiled their gardens and killed fish in their ponds, they say. I used to raise fish but they ve all died due to polluted water spilled into the pond from the canal, said Nguyen Thi Hiep of Trung Hamlet. After investigation, government inspectors from the provincial Department of Natural Resources and Environment fined the company VND 42.5 million for not treating wastewater properly before discharging it. The filling of the canal then caused flooding in residential neighborhoods during rainstorms. 11 The company responded with its own investigation and corrective actions, stating that it has remedied the problems. It stated that it does believe environmental protection is an important priority and integrated into its business planning

10 8 Tan Hiep Phat Next steps As mentioned previously, the company is moving through a period of assessment and evaluation of their business processes to ensure sustainability for the future. This includes developing sound community and environmental policies which adequately reflect its core values. From a CSR perspective, this will include not only steps to nurture a strategic and consistent CSR approach, but building the internal framework by which it can be managed and its impact measured. Questions for student discussion 1. What are the advantages and disadvantage of having the THP s marketing and PR teams in charge of CSR efforts? 2. Who are THP s stakeholders? 3. If THP is to adopt a truly strategic CSR strategy, what are the most important areas or issues for them to focus on? 4. THP s business requires several inputs, especially those from the agricultural sector. Should they require their suppliers to follow a Code of Conduct? Why or why not? What issues should that Code focus on? 5. How should THP respond to the factory incident that reportedly released waste into communities near one of their plants? 6. Is it possible that the contradiction between THP s environmental actions concerning the canal and stated environmental interest is an example of greenwashing? Or do you think THP is truly concerned with environmental protection? 7. Are THP s current community engagement programs strategic? If not, how can they make them more strategic?