Ethics and Corporate Social Responsibility at VGL

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1 By number of hits, the largest share of users on the VGL website are simply making a quick check of when the bins are due to be emptied next. Few people are spending much time on contact us about us and why recycling matters. That finding doesn t make those pages unimportant. But what stands out as the most significant insight is that web users are finding the website especially helpful as a research tool in a couple of areas: what is recyclable and VGL in the community. That might well offer VGL a steer as they work towards supporting one new major charitable community initiative. It s not the job of this toolkit to make specific recommendations to VGL, but it seems clear that there is an appetite for community education and outreach exploring the idea of what is recyclable? Ethics and Corporate Social Responsibility at VGL Why would a firm like VGL be motivated to have an ethical approach to business, and dedicate staff time and resources into acting ethically? It s probably safe to assume that the Phoebe is a genuinely ethical businesswoman. Yet there s a good reason why acting ethically even going well beyond what the law requires - can help to reduce some costs, as well as boosting revenue and thereby contributing to higher levels of profitability and returns. VGL directors will understand this point. Take the example of a community initiative, as discussed above. Such an initiative may be worthy of support in its own right. But it also opens up business opportunities for VGL. If client groups were educated around the area of what is recyclable, outcomes like the ones below may contribute to the firm s bottom line: Households recycle more efficiently, cutting costs at VGL s processing centres Customer groups get a greater awareness of VGL s activities and business services. We already know that a huge 48% of all the time users spend on the VGL website is spent looking into activities that the business performs in the community. The firm s ethical stance helps to differentiate it from rivals and competitors. Engagement with the public may even be used to generate market research data that can support the marketing mix in general. Copyright tutor2u Page 27

2 Production, Human Resources and Business Culture at VGL At A2 level, a great advantage is that you are already expert (!) in the content of the AS F292 unit. The OCR approach to that unit emphasises the strongly interconnected nature of people and production. In addition, the 2016 F297 case study firmly weaves together issues of production, people and the whole culture of VGL. There seems little advantage to finely separating out these issues. In the pages that follow, these three topic areas are discussed as a whole. For instance, consider the case study statement that a major metric for VGL is product quality. Indeed, any sub-standard or contaminated product will realise only a fraction of its potential revenue. Careful pre-sorting can help to improve product quality, but it is the commitment of production line employees that can make the major difference (lines 76-78). This consideration invites you to think about the difference between a quality assurance and quality control approach to production. At AS level you perhaps reflected on this issue, noting that a quality assurance approach means taking proactive steps by the workforce to work towards a target of zero defects. Production improvements, cost control and waste minimisation needs the attention of managers and staff. VGL s production manager has acted on the basis of these facts: Despite being a cost, staff training is considered to be essential in ensuring commitment Currently all shift supervisors are responsible for delivering basic on-thejob training which focuses on the essentials: what to do, and how to do it. (VGL s production manager) insists that unless employees know why the task is important they will be less effective. The why is readily explained by reference to VGL s Four Pillars, a statement of Phoebe s business philosophy (lines 79-85) (VGL s production manager) and the shift supervisor met with shift A employees to discuss VGL s Four Pillars. He also collected intra-shift data which measures the level of contamination (of waste entering the recycling process) (lines 86-88). Initial analysis of the data in table 2 reveals some interesting findings worthy of further investigation. There is a variable pattern of contamination between the three shifts over an 11 week period. Could these differences in performance be due to differing levels of performance, management and training of employees? It s hard to spot general overall trends in the data presented. Might time series analysis (see pages 14-15) be able to offer any insights? Copyright tutor2u Page 28

3 During the first four weeks of the investigation, both shifts A and B show an upward trend in contamination rates. Shift B has a higher rate, but are standards slipping with Shift A? By the end of the first 4 week period, the upward trend in contamination reaches a point where team A have the highest rate of underperformance. Do we learn anything? The supervisors of the other two shifts became unhappy when they found out about Michael s meeting (with Team A). They argued that contamination is not always internally controllable, particularly when sorting household waste (lines 91-93). Michael, the production manager, had already decided to take steps to address the issue. His discussion with Shift A about the Four Pillars yields some interesting results. Contrary to expectations, in the period up to the end of week 11, Shift A shows the sharpest deterioration in performance. Workers on the other two shifts make better progress in reducing contamination rates. The results presented offer something of a puzzle. In the two weeks after the intervention by the production manager, Shift A show a sharp improvement in performance, but the effect is temporary. Michael s discussion clearly had an effect, but the effect was mixed, at best. You might conclude that the supervisors are right: staff on the recycling production line cannot directly control contamination rates. Copyright tutor2u Page 29

4 We are left in little doubt that training and supporting staff is an important part of the standard operating procedure of VGL, so could be said to be embedded in the culture of the business. The factory floor is a challenging place to work because it is busy, dirty and noisy. Maintaining concentration amongst operative staff is crucial to reduce the risk of personal injury or a substandard product... All staff on the factory floor must wear prescribed safety clothing. Further, all of VGL s employees have to undergo a two-day induction course before being allowed to be close to any of the production machinery (lines 66-71). It s hard to draw firm conclusions about the ways in which shift workers (and their supervisors) should handle the issue of contamination. Perhaps it s best to return to one certain finding: indeed, different postcodes exhibit considerable variation in the type and quantity of the waste they produce... When Michael mentioned this to Phoebe she wondered how VGL could better communicate with householders and, in particular, what function social media might play in this. She asked VGL s Marketing Manager, for analytics of VGL s website (see Table 3) (lines ). This point was addressed on page 25. From a strategic point of view, the problem of contamination on the production line can also be seen from a perspective of the marketing department. Linking to the proposed diversification into textile recycling Consider the strategic marketing proposal discussed on page 24. Increasing competition has caused VGL to consider diversification into the textiles recycling market Initial research by Asad has suggested that textile waste falls into one of three categories (lines ): 1. good quality clothing and textiles which can be sold intact. Typically this is exported to emerging economies 2. poor quality textiles which, after shredding, are repurposed. A typical use would be producing thermal insulation material for house building 3. non-commercial recovery which goes to landfill. A marketing shift of this nature would raise both people and production considerations. Sorting mixed bags of textiles is labour intensive and has a degree of skill associated with it which is not currently available in the existing workforce. The staff on any textile line would, therefore, require both training and additional pay (lines ). Diversification into textile recycling links to all the company s objectives. Before thinking through some of the bigger questions this presents, take a moment to consider the production costings on the next page. Copyright tutor2u Page 30

5 Michael (the production manager) thinks that unless VGL can process about 200 tonnes per week the venture is too small to be worthwhile. The space needed for textile sorting could be created by reducing the area currently designated for storing bales of recycled materials. If a second-hand baler and vehicle were to be purchased the venture would have a capital cost of about Four sorting staff and a new driver would be needed; therefore, Martin has budgeted annually for staff, transport and machinery maintenance (lines ). Analysing Table 4 as a decision tree Is the production manager correct in his basic assumptions? Table 4 has been analysed taking an approach you might be familiar with a decision tree. This approach combines estimated financial returns with the probability of those returns being realised. Consider a 10% probability of a selling price per tonne of 300. That can be assigned an estimated money vale (EMV) of 30 (since 300 x 0.1= 30). If the probabilities in Table 4 are reliable, the EMV of the average tonne of recycled textiles is 510. That figure is the sum total of all five EMVs. If the purchase price of a tonne of materials is 300, then the final EMV value for a tonne of mixed fabrics is 210. At 200 tonnes a week, the recycling proposal would contribute 42,000 a week to the company s fixed costs. Does that look like a good deal? Since Martin has budgeted 100,000 annually for staff, transport and machinery maintenance, the recycling proposal looks to be fantastically lucrative. At 200 tonnes a week, the proposal would achieve payback on the capital cost of the necessary equipment in less than two weeks. The annual cost for staff, transport and machinery maintenance could be covered in less than three weeks. In summary, it would appear that the proposal would breakeven at far less than the 200 tonnes a week that Martin has suggested as the necessary target figure. That doesn t make the recycling proposal a sure fire success. Costs may be higher than expected. The probabilities assigned to selling prices might be too optimistic. Qualitative factors, such as the uncertainties surrounding hiring, training and retaining the necessary staff would need to be carefully thought through. The loss of storage space to accommodate the new process represents a business cost that is difficult to account for. Nonetheless, the recycling proposal looks to be worth serious consideration. Copyright tutor2u Page 31